Whether you are a business buyer or a business seller, the most important part of any business sale is the amount of money that is going to change hands.
When you are deciding on a listing price or on how much to offer a seller, you will need to make your own determination of what the business is worth.
At first glance, it seems reasonable that a business is worth what the financial records say it’s worth, and perhaps the value of the inventory, but the nuances of business pricing are typically much more complicated than that. Here is a great place to use an experienced and knowledgeable business broker for help. They know the nuances of pricing inside and out, and could be a great asset for this part of the process.
What are a few aspects of a business that may not be initially obvious in terms of value, but can bring value to the table nonetheless? These are the kinds of questions you should be asking when determining either a listing price or an offer:
Does the business have a well developed management team in place and happy employees? Is the staff organized and do they have clearly defined roles?
What kinds of operating procedures are in place? Does the business have an organized system for dealing with things like inventory control and tracking sales?
Are the financial records clear and up to date? Do the records accurately reflect the numbers the business generates? Is there a very limited amount of personal expenses?
Does the business have a strong internet presence with a professional website? Does the business have a marketing plan in place and implemented? Does the business make use of all possible avenues, like social media, for bringing in new customers?
Does the business have room for growth? Is the infrastructure in place for scaling the business in the future? Does the business have an aspect that makes it unique in the market?
Is the staff situation sustainable? Are employees cross-trained? Do key employees have the motivation to stay on if the business changes hands?
Are there a limited number of liabilities in the business? Is there any pending litigation? Is there a diversity of clientele?
When deciding what you want to get for your business or what you are willing to pay, don’t just focus on the books and the inventory list. Use the knowledge and expertise of your business broker to determine what parts of a business bring more money to the table.
Are you a seller who is trying to determine the listing price for your business? Are you a buyer who has questions about what to offer for a specific business? Please feel free to leave us a comment or question here, and we will be happy to answer your pricing questions.
Leave a Reply