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How do I calculate the proper sale price when Selling a Business?

Home » Entrepreneurship » Selling a Business » How do I calculate the proper sale price when Selling a Business?

Often, the value of a business is much higher to the seller because of vested interest. You have devoted your energy and resources to it in hope of success and perhaps even see it as an extension of yourself. This can make it very difficult to name a price for the organization, when the time comes to do so. Many times, what seems fair and equitable to you may not be an amount that a buyer is willing pay. In order to determine the best price tag for your business, consider the following questions.

How does the market put a price on your business?
What can you do to maximize your business�s value?

The value of a business should be greater than the total values of its hard assets. An ongoing business needs to have everything necessary for continuing success after the sale. This includes equipment, location, experienced employees, customers, etc. How will you determine the value of all of these things? The most expedient way is to hire a business appraiser.
Although many business owners don't want to pay to have an appraisal done, the result of a good business appraisal is a price low enough to attract buyers and high enough to pay the current owner for the business�s full value. A business appraiser, who will be a cpas/what-is-a-cpa.php">CPA or an MBA, will write a valuation report for you, something that gives your price credibility by providing the potential buyer with a specific list of assets and their values.
After your appraiser has given you an approximate value for your business, consider where on the value scale you will place your original price. If you have time, you may want to ask high, leaving room for negotiations. If you want to sell quickly, you may list your business exactly at or below the appraisal value. Remember, however, that it is much easier to drop your selling price, once named, than to raise it. Another option is to not set a listing price at all, but to instead hold a controlled auction.

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