Understanding the value of your business

Selling a business after years of hard work and building relationships with clients, employees and suppliers can be a difficult decision.

This is why you should always contact experienced business advisers who can help you weigh up the pros and cons of moving ahead.

However, once your mind is made up, there are many issues you must still consider before accepting an offer. One of the most important factors is the value of your business.

It is common for owners to over-estimate how much their organisation is worth, resulting in a lack of interest among buyers. Alternatively, undervaluing a business can be even more costly, with sellers handing over their operation for far less than its true market price.

Here are some of the factors that could affect the sale of your business:

Assets and liabilities

Your organisation's assets may include the business property, as well as equipment and current inventory. These are typically considered tangible assets, although your brand's reputation, loyal client list and intellectual property will also be assessed.

Meanwhile, the business is likely to have debts and other liabilities that offset the value of your assets.

Reason for selling

Unsurprisingly, the circumstances for offloading your business will come under close scrutiny. If the organisation is struggling financially or you are forced to sell for another reason, you can expect a lower offer than when putting your business on the market while it's performing near its peak.

Buyers will examine your finances, including past, current and projected revenue, profit and cashflow. Whether your business requires significant capital expenditure in the future is also important.

Economic factors

Various external factors will play a part in negotiations. The state of the economy, how your industry is performing and the availability of credit could all have an impact.

The number of other interested buyers, as well as the value of businesses similar to yours and general demand levels in the market will also affect offers.

Management and staff

Your business will receive better offers if you have a strong, reliable management structure that is underpinned by a roster of highly qualified and loyal staff.

Buyers may be concerned that your exit from the company could leave a leadership black hole, so you may want to consider a comprehensive succession plan to provide further peace of mind.

Are you selling your business? Contact the team at WMC Accounting to learn how we can help you finalise the deal.