12 Tips before selling your business – Tip 4 of 12
How is a buyer going to value my business?
Particularly with family ownership, companies sometimes run everything through the business, such as country club dues and car allowances. Loading the business with tax write-offs can make you appear less profitable and cause a buyer to undervalue your business. Before selling your business, you should have a fair and realistic understanding of the value of your enterprise. Hiring an independent party to perform a market valuation is the best way to do this. The market valuation outlines the strengths and weaknesses of your business and provides you with a list of values of the most valuable tangible and intangible assets of the business.
There are many different types of business valuations. For preparing to sell a business, one that is rooted in a practical inventory of strengths and weaknesses is best. For a single location business in a mainstream industry with annual revenues below $5 million, you should expect to pay between $5,000 and $7,500.
Beware of free valuation offers by the business broker who wants to sell your business. Their motive is often to get a quick sale which may mean being paid less than the real value of your business. When you keep the valuation and business selling process separate you will have a better outcome.
Answers to these and many more questions can be found in The Exit Strategy Handbook. See Chapter 6, “Preparing for Your Last Customer: The Buyer,” page 69.
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