Valuing a business is no easy matter but it’s important to get as accurate a figure as possible, whether you’re planning to sell or looking to attract investment.
There are simple formulae – such as earnings multipliers – to apply that will give you a guide to value. But because the worth of any business is predicated on a complex combination of tangible and non-tangible factors, it’s never a cut-and-dried process.
You want to go to market with the right price, so who can you trust to give you an honest – and accurate – valuation?
You can instruct a business transfer agent or broker to help you set a price and to find a buyer for you, should you decide to proceed. An experienced broker will help you arrive at an objective valuation based on tried-and-tested valuation models, coupled with an in-depth knowledge of market conditions.
A good agent will also understand what might add value to your proposition and should already be in contact with buyers who are actively looking for an acquisition. Selecting a broker is a good idea if you have a large or complex business and want to delegate negotiations but do take time to appoint an agent with experience in your sector or local area.
Some accountants specialise in valuing businesses for sale and will bring a high level of professionalism to the process.
The accountant will likely take an inventory of all your company’s assets, creditors and debtors to ascertain the ‘paper’ value of your business and will also advise on the tax implications of any sale. It’s a sound approach if you want to verify your income and will demonstrate to buyers that you’ve performed due diligence.
However, your accountant won’t consider the other, less tangible aspects of your business that could add value – sector growth potential, brand and staff, for instance – and they won’t help you find a buyer.
Online calculators are designed to offer ballpark business valuations, but they can be surprisingly accurate. You start by entering a few key financial details – usually information such as location, business niche, turnover and tenure. The valuation will factor in the relevant sector-specific multiplier, as well as recent sales of similar businesses before suggesting a figure. It’s as good a place to start as any – especially if you run a small business.