If you’ve come to the decision that it’s time to sell up, then it is time to get your house in order. if they are interested in some contracts recently secured then valuing the business based on more of a forecast profit figure, as opposed to a historic figure, may be more appropriate. Knowing what the buyer is after may also drive the valuation method i.e. We often advise clients at this point to really consider what they are selling as this can bring into focus a fair valuation, for some businesses it is the business name and customer base, whilst for others it may be some key contracts that have been secured. The valuation would then also generally require looking at the fair value of assets and liabilities on the balance sheet.īusiness valuations are very specialist, so it is important to speak to a professional adviser to ensure it is done properly and that you do not end up letting your business go for less than it is worth. There are also decisions to be made about exactly which profit figure to use whether most recent, the average over a few years or even a forecast profit based on your current knowledge. The phrase ‘something is only worth what somebody is willing to pay for it’ may be true, but you need to know in your own mind a fair valuation before the sales process begins.Ī valuation is typically based on the profitability of the business, using a multiple of profits after adjusting for certain items, however the choice of multiple and calculating an adjusted profit figure can be challenging. Be pragmatic and don’t set your expectations either too low, or too high. It’s important to know what your business is worth before identifying potential buyers. It can therefore be important to look at the management structure to ensure that the business could continue to operate without you there. One common example of this, especially for smaller businesses, is that the value in the business is the individual trying to exit. Acknowledging and documenting your anticipated end goal will undoubtedly enable you to make better business decisions along the way, to realise that aspiration. Your strategy for exiting the business is just as important on day one as it is in the days, weeks and months you spend on the sale of it. Having a comprehensive exit strategy in place from the get-go not only shows potential investors that you know where your business is headed but it also helps you to circumvent common vulnerabilities and to take advantage of unforeseen sale opportunities, should they arise. It’s also important to demonstrate a degree of flexibility and a willingness to adapt and react as your circumstances change. When devising your exit strategy, think about how you’re going to grow your business, who might purchase it from you and how you intend to get the best return. In fact, it wouldn’t be a bad idea to make room for it in any business plan you draw up in the early days as it may well help to determine which business structure you should opt for. Coming up with an exit strategy need not wait till the end of your business’ life, as the name perhaps suggests.
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