So, you might be thinking that now is a good time to sell your business.
You’ve been working your entire life for this moment, but you have no idea what to expect or how to determine the value of your business.
Jumping into a negotiation with a potential buyer without a professional estimate of your business value is a recipe for disaster.
Many business owners end up leaving a fortune on the table by not fully understanding their value or how to maximize it before having discussions with a potential buyer.
Here are 4 factors that will play a major role in how to determine the value of your business.
1. Your geographical location
You’re worth much more than your revenue, which is why it’s so important to dive deeper than your annual sales report and other financial formulas when figuring out how to determine the value of your business.
Your geographical location holds major value when it comes to your worth. For example, an upscale, newly renovated building on a good side of town will contribute more to your valuation than a dingy, outdated one. A nice location could also pique the interest of an acquirer looking for synergies.
2. A discounted cash flow analysis
The time value of money dictates that money decreases in value as time goes on. Because of this, a discounted cash flow analysis will be necessary to accurately calculate the value of your business.
This analysis estimates the current value of your business based on the company’s projected future cash flows. It takes a deep dive into your annual cash flow, projecting it into the future and using a net present value calculation to discount the value of the future cash flow to the present.
3. Your assets
Combine the value of everything your business owns (e.g., equipment, inventory, employees, etc.), then deduct all liabilities and debts from this number. Afterwards, take this sum and add it to your expected revenue and earnings.
4. An official quote from a business intermediary
You should get an updated business valuation every year. If you wait until you’re ready to retire to get your first valuation, you may have to postpone your retirement due to your business not accruing as much value as you thought.
When you get an accurate assessment ahead of time, you can work with M&A specialists like National Business Search to increase the value of your capital, and in turn, the value of your business. With over 300 businesses sold, we’ve got just the experience necessary to help you get the most accurate valuation and sell for nothing less than what you deserve.
At NBS, we’ve got our hands in plenty of different industries and chances are that we’ve successfully sold a business like yours before. Get a free business valuation from us today to see just how much you could retire with!