Selling a Business

Determining the asking price of your business for sale?

When you are selling your business, you need to determine the asking price. But putting a price on a business is not like putting a value on your house for sale. If you are looking for a house, typically all the houses in the subdivision are roughly the same size and have the same features so you base your house price on a similar sale. What happens if you have a house for sale and it is a custom built home, the house is larger than others in the area, the land is larger than other lots, how do you determine the value for sale when this is a unique property? The same problems exist in a business.

No two businesses are identical. You have have the same name, the same franchise, the same size of the building, the same price of goods for sale but one location has more sales and profit than the other. Needless to say, the one with more profit will have a higher selling price.

In summary, there are no two businesses that are identical therefore you cannot use the analogy of the houses for sale and see what other businesses have sold in your area. There is no central listing agency for businesses for sale. MLS is used for houses for sale but businesses for sale are sold by business brokers, real estate agents, lawyers, accountant and consultants. Each one works independent of the other and they do not post their business listings on a central processing. Some business brokers will post on The Business Place therefore you can see what others are asking for a similar business. However, location is very important for a business value.

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Why should you sell your business?

You started a business for scratch 40 years ago, now you are debating what to do. Do you sell the business, do you retire,
do you do something else? These are all thoughts which you have been contemplating for many years but now you want to make a decision,
what should you do?

Here is a list of reasons why you should sell your business soon:

no heirs to take over the business
senior staff have been very good to you and you want to give them an opportunity to buy the business
your business is stagnating and needs new ideas
your business has matured and there is no or little upward growth available to the firm
the business outlook is grim and you see that sales and profits will drop in the future
technology or technology is currently being developed which could have a major impact on your business
you are bored and not longer enjoy working in the business
health issues of the or someone in the immediate family which needs a lot of attention
competition is increasing
business needs a large capital injection to grow to the next level
business i.e. a retail store needs to be refreshed with a large large capital improvement commitment
if you need to spend the money on the store today but are going to retire next year, why incur the additional costs when you will not
receive the benefit
you are getting older and you find the the physical requirements of the job too gruelling
the business requires a lot of additional hours to be worked to built it back up because you lost a major client and you are not willing
to make the commitment
you know that you are about to lose your largest client and that will have a significant impact on revenue and profits
the market is changing and you are not able to keep up with the innovations in the market
technology is replacing equipment which you have purchased for a fraction of the cost, now you need new equipment to keep up with the
competitors but still have loans on the old equipment which is not obsolete and worth only a fraction of the original cost.
This happened in the printing industry and entertainment industry when digital equipment replaced older technologies.