What Is My Business Worth?
This is the number one question for business owners who are looking to sell their business and in many cases, lifetime investment.
There is no simple answer to this question and a Licenced Business Broker can work with you to determine the potential sale value of your business.
There are a number of ways that a business sale price can be determined but the end result is the business is worth what the market will pay for it.
Smaller businesses are usually calculated on a multiple of PEBITDA ( Proprietors Earnings before Interest, Tax, Depreciation and Amortisation). The multiple determined is usually specific to the industry, location of business, recent similar sales data plus other factors.
Larger businesses may be valued on a multiple of EBIT (Earnings Before Interest and Tax). Again, the multiple used is specific to the type of business, its risk profile, location and other factors.
For small businesses that are struggling and showing a low or negative profitability after owner drawings, the appraised potential sale value is often a case of looking at the value of tangible assets of the business.
There are other methodologies for appraising businesses such as Discounted Cash Flow however these are generally less reliable and based on future maintainable earning projections which are not in most cases seen as reliable data for acquirers. You may think that your business has great "future potential" but this is not something that a buyer is going to base their decision on.
Similarly, Business owners who remove cash from their business cannot use this as a selling point to prospective buyers. A general rule that buyers will abide by is "if it's not in the books and declared to the Tax Office, it's not in the business in the first place".
MNC Business Brokers offers FREE BUSINESS APPRAISALS for business owners looking at selling their business.
Contact Brian Hill on 0438 633 607 if you would like to discuss selling your business.
Call - 0438 633 607