How Much Is My Business Worth – Is This The Right Question To Ask?

One of the most frequent questions that I get from business owners is: “How much is my business worth?” Before we can answer that question there are other things that we must answer and do before we can get a complete and accurate answer.

First things first: If you have a desire to attract the most compatible, ready, willing and financially able business buyer, you must first present your business in the best possible light.

A few questions that you should ask first are:

Do I have a business that has been profitable for at the least 3 years?

Do I have verifiable tax returns and financial statements to show proof?

Anyone can start a business but it takes a very smart and capable person to turn it into a profitable business. As the owner of a business, can you be honest with yourself and say with 100% certainty, that you’ve been a successful and efficient business owner?

Another consideration and question to ask is: Have a prepared for the sale of my business by putting a stellar exit plan in place to provide for a orderly sale and transition?

If you own a business and you’ve not put your exit plan in plan, you’re causing a considerable decrease in value. If you attract a buyer that is ready, willing and ready to do things on your terms and your transition plan is chaotic, expect the buyer to want a discount on the finally selling price as a result of having to smooth out the “rough edges”.

Have you discussed in complete detail with your family about your desire to sell the business? Not doing so can cause headaches during to sell process and many business owners end up caving into the demands of their families and often times hinders the sale of the business.

You may be thinking “how do any of the above effect how much my business is worth”. The answer to that is– preparation. Preparation is going to answer the question: How much is my business worth.

Ideally you should start the process of getting your business prepared for sale about 2 years prior to putting it on the market for sale. The preparation that is involved will greatly affect how much your business is worth.

Many business owners do not take these things into consideration when they decide to sell their business and are extremely disappointed when the official appraisal is provided and the numbers don’t live up to their high expectations.

Every business owner has the right to believe their business is worth a certain amount but the reality is, did you prepare? Be honest with yourself.

If you did not prepare you could be in for a disappointment in the event that you need to sell immediately.

Before asking “How much is my business worth?”, read the above, let it sink in and if you’re in need of any help get in touch and I am sure I can help you put a plan in action.

How Much Is Your Home Based Business Worth?

If the electronic energy in your body’s hydrogen atoms could be utilized, scientists have calculated that a person could supply all the electrical needs of a highly industrialized country for almost a week. By this estimate, the average person is worth about 85 billion dollars! Never sell yourself short. You are unique and immensely valuable as a human being. The payments you receive from life are what vary from person to person.

Anyone building a business for themselves is actually building a lifestyle regardless of who signs the paycheck at the end of the week. You hold the office of the President of your own corporation, which makes you responsible for success and failure. The members of your team are the stockholders and it is your job to see that the value of the stock increases in the years ahead.

Even though the operations of a corporation are complex, they can be reduced to four basic functions: Finance, Production, Sales and Research. Without proper financing, there would be no production. Without production you would have nothing to sell. Without sales you would have to stop production. Without research you could not keep up with the changing times. All four of these functions must flow in unison in order to have a successful business. How successful you are in meeting these challenges will determine your present and future growths.

You must be concerned with growth because nothing in this world stands still. A body in motion tends to remain in motion until acted upon by an outside force. A company that is growing has a tendency to keep growing. The same goes for a company that is either standing still or falling backwards. All responsible business owners should be able to look into the future and predict how well they will progress based on their current level of activity. Never before in the history of mankind has an individual had the opportunity to make a brighter future for themselves than now.

Stand back and look at yourself and your future objectively, as an intelligent stranger might. Ask yourself what you are worth right now. What is your value to your business and what is the value of your business in the marketplace? If you were an outside investor, would you want to invest in your company? If not, then change the reason why. Give personal attention to the growth of your business so it doubles in one year instead of eight. Find a timely business model that has achieved what you want and follow it. If you do twice as much, you are bound to receive twice as much. It sounds simple, but 95% of business owners can’t grasp it. Knowledge is power.

Sales is more than selling a product or service, it’s the way in which we sell ourselves to everyone who is interested in what we have to offer. It is the way we get along with our associates, our families, friends and neighbors. One extra call a day leads to 250 extra calls in a year. In 5 years that comes to 1,250 calls that you wouldn’t have otherwise made. A person can triple their effectiveness in less than a month. How have you been handling the four basic business functions? How much time are you really putting into moving forward?

Home based business owners have to be harder on themselves than any strict boss at a regular job could ever be. Yes, the reason we want to work from home is the have the freedom of doing what we want, but we can’t build a business with that attitude. You have to put the time in to set your business up first. Then we have to constantly strive to improve our effectiveness so we never have to worry about going back to being a puppet of the corporate giant. It’s all up to you to make these decisions. It’s the difference between being worth an average amount of money and an above average amount.

Tomorrow is a brand new day. Begin to think of ways in which you can increase your effectiveness.

What is My Business Worth?

Small business owners all over the world usually fail to stop and ask themselves just what their business is worth until they are attempting to sell their business or preparing for retirement. However, gaining early perspective concerning the worth of your business from a third party can greatly benefit the future of your business goals and overall direction. If you are at the point of selling your business or planning for retirement, succession, or divorce, this simple question has no simple answer. Depending on what value is being calculated, a third party could conclude on a much different price when assessing fair market value versus another calculation like most probable selling price.

For the sake of simplification, only the most probable selling price method will be discussed here. Since you are probably hoping to determine the value of your company so you can sell it or pass it on to an heir, this is the method that will be determined. Three approaches can be taken, including market, income and asset approaches. Market approach is when your business is compared to similar businesses that sell the same goods or services and how much they were sold for. This cannot be the only approach however, as comparing businesses in different states that are different sizes from one another can throw off findings.

Income approach calculates how much money your business is generating for you on a yearly basis and determining a reasonable price it could be sold at. Since small businesses are a risk and not guaranteed to generate income, an accommodation must be made for the risk factor. Cash flow is identified through a process known as recasting which involves dissecting tax returns and determining how much money actually benefited the business owner. By following trends of past years, you can calculate estimated future returns the business will make for the new owner.

The final approach is called asset approach. Also known as cost approach, this method deals with physical assets but does not provide much value for goodwill. Many businesses place a good amount of emphasis on goodwill, meaning this would not be the best approach. However, if your business has a number of investments in outside sources, this could be a very beneficial method of determining how much your business is worth. As you prepare to put your business up for sale, understand that negotiations will undoubtedly occur and the market will be the ultimate determining factor of what you can sell your business for.