Selling a business requires you to consider two elements: value and market. In another section we have discussed gauging the market for a sale. In this section we will examine how valuing your business is important and how to value that business. If you want a sale that realises the potential of that business you need to understand value and how it is calculated. There are key factors in valuing a business which will be listed below.

• The first factor in valuing your business has to do with finance. All historical, current, and projected profits and cash flow need to be examined. In other words, you are looking at your business plan to determine your financial stability, how well costs are controlled, and what your capital expenditure might be for the near future.


• Some external factors include the economy, if potential buyers would be interested, and if there are numerous similar businesses in your area. Also you need to consider other businesses that might be on the market. A business like yours that is on the market can determine what value you might be expected to have.


• There are some intangible properties regarding value that make a difference. Your good will and sharing intellectual property can increase the value. If you have patents you might consider selling them to help increase your profit. Customer relationships, growth potential, and any economies the new owner can leverage are part of the intangibles.


• Assets can make a difference in value. Do you have a lot of property, equipment, and stock in hand? If so this can certainly spark a higher profit than another business. If your order book has numerous orders it can also increase the value.


• Liabilities such as your level of debt and other liabilities will be factored in. If your business has a lot of debt a new owner may be less inclined to take it on for a decent profit.

It can be hard to value that last point, but your people that work in the company will certainly be part of the valuation. Management is one factor many look at to increase or lower the value of a business. If you have a successful record with management the value can increase. Is the business dependent on your skill? If so, this could affect the value for the worse. You also need to make sure that the experience and commitment of the staff will remain. This can help to increase the profit during the sale.

You will not be able to value your own business for sale. Certainly, you will have an idea of what you hope to earn from the sale, but an expert will need to do the valuation in order to have a successful sale. The buyer is going to bring in their own expert to value the business before they make an offer. It will be very hard to get the value for your business if the factors above are not presented to an expert.