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Is my business worth selling? 5 steps to determining whether or not your business has value

Brad OConnor

July 29, 2021

 

Selling a business is a tricky process with a lot of moving parts. Before you decide to sell, there is a great deal of research to be done. One of the main aspects to consider is the current value of your business, and whether now is the right time to sell. Here are five tips to help you determine if your business is worth selling.

1.    DON’T: Rule of Thumb

You many have seen or heard of a Rule of Thumb for quickly estimating the value of a small business, but the truth is that business valuation is much more complicated than that. There is no one formula to obtain an accurate value. There are many aspects to consider that are not included in the typical Rule of Thumb, such as business debt, owner’s compensation, inflation and more. When evaluating a business, it is essential to take all figures into account, so that the valuation of the business is as accurate as possible. 



2.     Talk to an Expert!


You are an expert in your industry, and we are experts in ours. Let us help you every step of the way! Certified and experienced business brokers have the market knowledge and expertise to guide you through the valuation of your company. We can help you find value within your business and suggest strategies to help increase your sales value. Working with an expert gives you peace of mind that the value of your company is being evaluated properly, with your best interests at heart.


3.     Asset-Based Valuation


Asset based Valuation is one of the more common approaches to determining the value of your business. This type of assessment takes into consideration the book value and the liquidation value of your company. The book value is the net worth of the business, which is calculated by subtracting liabilities from assets, and can be shown in your financial statements. The liquidation value of a company is when it sells off all its assets, pays all its debts and taxes, and distributes the remaining among shareholders. This method is simple and easy to use and will provide a quality valuation of your business.


4.     Valuation Based on Earnings and Cashflow


Another strategy for determining the value of a business is conducting an evaluation based on the business’s earnings and cashflow. This type of business valuation takes into consideration the business’s discounted cash flow and a going concern value which is a number based on the company’s future cashflow. The discounted cash flow methodology predicts future earnings and discounts them at the valuation date. The going concern value is a comparison based on your business’s current cashflow and predicted future influx.


5.     How well does your business operate?



A couple of non-financial aspects to consider when determining the value of your company is the efficiency of daily operations, and the quality of your team. Dedicated staff members are an incredible asset for a small business; people who communicate well, work hard and genuinely care about the success of the company are inherently valuable. In addition to your team, consider the operations of your business. Take a look at the effectiveness of your company structure, and the potential for growth. Keep in mind that not all value is monetary; a business with a solid team that is well-rounded in its operations is an attractive option to buyers.


Ready to get started? Contact our office today!



More questions?  We can help.

EVALUATION/CONSULTATION


If you are a business owner considering selling a business, and would like to learn more about OConnor Business Brokers and Consultants and the services we offer, please contact us to arrange a confidential business evaluation. 

You will meet one of the Directors of OConnor Business Brokers, and your requirements will be discussed. During the meeting you will have the opportunity to find out more about selling a business, and how our business brokers and M&A Advisors can assist you with the business sale process. 

Unlike many other approaches, OConnor Business Brokers start without any preconceived ideas about what is right for you and for your business. By understanding the business and your motivation we can help steer you in the right direction. This often challenges conventional thinking and comes as a refreshing change to the norm.


The Directors of OConnor Business Brokers have experience as business brokers, business consultants, M&A advisors, and business owners. We understand the challenges and pressures that face a business at any one point. We therefore use our time together not to try and sell you our services but to help you understand your options and how we can help.


An initial meeting lasts approximately one hour, and can take place virtually or in person at our office.



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