Small businesses are constantly being sold and bought in the market. Current owners need to know how they can put a realistic value on their business if they want to sell it. If you have the same dilemma, you would know the difficulty in pricing small businesses.
If you set your price too high, people may not be interested in buying. Set it too low, and people will wonder if there’s something wrong with your business.
You might also be wondering where your businesses should be listed. Ebay, for example, has a wide-reaching medium is often successful, but fraud is common place.
There’s simply no fixed system to help value any private small businesses. The IRS, Courts of Law, and Inland Revenue systems all have different schemes for valuing businesses. You can also use mathematical formulas, but they’re also not absolute either.
But there is one sure thing you should ask: What price will you be happy to sell your business for, and what price would a buyer be happy to pay?
It’s always a matter of negotiating, which is something you shouldn’t be afraid of. Maitland Kalton of Kalton Solicitors London is considered an expert in this field. But to better answer that question, here are more tips to guide you.
Evaluating Small Businesses
Price depends on the different features and assets of small businesses. Asking the right assessment questions could guide you into setting and negotiating a beneficial price point.
- Does the business have employees full time or part time?
- Does the business operate on the internet exclusively?
- Does the business have fixed assets or stocks?
- Does the business have a full audit trail?
- Does the business operate in an urban or rural area?
- Does the business have clear growth prospects?
- Does the business require insurance/liability policies?
The answers to many of these questions affect the amount of legal work the prospective buyer will have to do. For example, small businesses in the UK employing more than five workers would have to comply with certain health & safety rules. Audit trails are needed for transparency and internal process evaluation.
Some of the questions also matter when it comes to actual asset value. Small businesses which are purely online often appear successful on paper but are actually underperforming. Fixed assets are easy to value, like equipment or real estate, while those without fixed assets, like technicians, health workers and legal specialists, are harder to value. Location also affects the value of the businesses as well.
There’s more to take into account than just the revenue and profit of a small business. It’s also about requirements, structures, policy and direction. Negotiate your small businesses well by being armed and prepared.
About the Author: Peter Arkwright recently retired from the military, and is now the Managing Director of www.bizseller4u.com, a new portal that allows people to list their business for sale.