If you want to put up a business for sale az you need to be sure you are putting the proper price tag on it. There are a lot of things to consider when you sell your business, but the most important is knowing how to calculate what your company is actually worth. Otherwise, you either run the risk of undervaluing the business and taking too little in the way of compensation for all your hard work or you scare away potential buyers who don’t want to pay for a business that has been considerably overvalued.
Don’t make these mistakes. You worked hard to get your business to where it is today and you should be able to reap the benefits of all that blood, sweat, and tears. It doesn’t matter what kind of business you are trying to sell; you need to have an accurate depiction of what it’s worth before you can attempt to close any transaction where ownership changes hands.
Here are the factors you must take into account to calculate what your company is worth:
Determining what your company is worth requires a whole lot more than just crunching numbers. You need to consider other criteria such as your competition and how much of it is out there, how your business is positioned to meet the challenges of that competitive marketplace, as well as factoring in the rate of growth of the company, sales and revenue, profits, and industry trends looming on the horizon that could affect all of those things.
Risk is also a significant factor in your calculations. What kind of risks are associated with the operation of your company and what should a potential buyer do to ensure that your business continues to operate smoothly when he or she takes over.
This is where you need to do some math. Start to organize all of your assets and add all of them up, be sure to include everything. We’re talking about everything the company owns, inventory, equipment, and so on. Once you have all of that tallied up, you must then subtract all of the debt and liability you have on the books at this moment in time.
From there, think about your revenue and the earnings you expect. Look at your annual sales and base some of these calculations from there. Look to the other businesses in your field and consider value based on the level of sales those companies can claim.
Discounted Cash Flow Analysis
Another important component to determine your company’s worth is to perform a discounted cash flow analysis. This is the formula you use to incorporate your annual cash into the company’s future, but discounted by the value of the cash flow from today through a “net present value” calculation. If that sounds somewhat confusing, not to worry, you can find plenty of net present value calculators online. You just input numbers into the calculator and it will give hard figures that will help you better portray your discounted cash flow analysis.