How do I work out the right asking price for my business?
There is an easy answer to the question of how much a business is worth – as much as someone is prepared to pay. That may be flippant, but it’s also very accurate, because when you are considering your asking price, careful consideration of market conditions will play an important role.
When valuing your business it is a good idea to bring in professional help from a valuation expert or an accountant. They will assess the businesses financial performance, its growth prospects, its customer base and track record, and then examine similar recent sales and market conditions to determine a reasonable asking price.
Factors to consider when valuing a business include:
- Value and condition of physical assets.
- Value of intangible assets such as intellectual property and “goodwill”, which is essentially the value of your business’s reputation.
- Cashflow and projected cashflow.
- Your market share and market position.
- Barrier to entry (how easy it would be for someone to replicate your business).
- Whether key staff will remain with the business when it is sold.