3 Things An Entrepreneur Should Know About Selling and Valuing their Dallas TX Business
Different people have different ways of earning money. Some people look for employment to have a steady stream of money throughout their lifetime while others look for a more risky option of starting a business. Starting a business is hard. It takes a lot of time, effort and hardwork to make sure your business is able to grow and progress with time. Being an entrepreneur is encouraged by governments and business experts because it is a profession of limitless profits. One can earn as much as they want provided they back their will to earn with hardwork, luck and strategic thinking.
Unfortunately, not all business that are started, end up being successful. However, those that do will have a lifespan after which it is likely to suffer a downturn or the owner may grow tired of doing the same thing over and over against even if it leads to considerable profits. Timing is the key in almost every field of life, not less in business.
Even when you are looking to sell your business timing is of paramount importance, however if you are unable to value your business properly no matter how perfect you are with the timing of being able to sell your business, it won’t reap you the type of benefits that a sale of such standard would merit. Here is a look at the 3 things that you should know about valuing and being able to sell your business.
1. Leave When the Sailing is Smooth
Once you have established your business, business owner’s instincts can kick in, making sure that the owner is able to milk as much profit of its cash cow as possible. However as good as option as it is in the short term, this is not one tactic that can be carried on in the long run. No business lasts forever and according to the statistics by the Labor of Statistics in the US, half of all the business are unable to last more than five years.
Most business owners don’t understand that emotions should not cloud your judgment. If you are attached to your business you will have an inherent inclination to keep the business under your command for as long as you can; unless your stewardship leads it to the brink of collapse. At that time, you may want to jump ship and sell the business on to someone else. This is where the problem lies. In a business you need to be able to foresee the future, better than others. To sell your business that is loss making will not earn you a desirable price for it.
However, selling an established business that is doing well will fetch you considerable money for the simple reason that a buyer wants to buy a business to make money. A well-established profit making business stands a better chance of recovering the money he or she invested in the buying the business, which is why they will be prepared to pay a higher price when you are looking to sell your business that is making a profit.
2. How Should you Value Your Business
If you plan to sell your business you need to know the worth and value of the business. Most entrepreneurs can make the mistake of considering the initial investment on the business when it was just a startup its initial value. For them anything more than the initially invested amount is a profit. Unfortunately, determining the value of the business is not that simple. It involves a multifaceted approach.
Another mistake is overvaluing the worth of your business. For example, assuming that the value of your business is $10 million when it is only able to earn revenue of $5,000 per month. So how do you find out the value of your business? The answer is simple. The value of your business in most cases is roughly three times the cashflow of the business. This can change if one of the following factors is present in your business:
- The revenue is increasing at a fast rate
- New Customers are coming in each day
In case any one of the two or both factors are operative in your business the value of your business is likely to be higher than three times the business’s cash flow. The value of a business is not the amount you believe your business stand for and should fetch when you sell your business. Instead it represents the value that a customer would be willing to pay or attach to your business. Customers hence are more willing to pay for the profits that a business earns instead of the assets that it is able to flaunt.
3. Get Ready and Line It Up
Selling a business and selling your old pair of sunglasses are different. Unlike the latter, you cannot advertise about it on a website and wait for people to offer you the right price. When you have decided to sell your business you’ll need to sound out the right parties about your company being on the market. You need to find a buyer willing to trust in the idea of your business as much as you do. You have to work with them, teach them and sell them on the idea of your business so that they are ready to pay you the big bucks.
Selling your business is a time consuming process. If you have set timelines before which you are looking to sell your business you need to start work early. Know the numbers of the business inside out to be able to convince the other party of the potential in your business. The other party needs time for their due diligence and you should take that into account.
It is normal for business owners to feel an affinity to their business. It is only natural that individuals who have invested their sweat and hardwork is a business will want the best for their business, but if you want to sell your business you need to let your business acumen make the decisions instead of the emotions. Sell it when it is making a profit, make sure you set the right value to entice and not scare away potential customers and last but not the least make sure you get things ready before hand. Especially if you a business owner is one of the following cities in Texas; Bedford, Euless, Keller, Roandce, Trophy Club, Southlake, Fort Worth, Dallas, Colleyville, Grapevine, Mid Cities you will need to be weary of your competition. Contact us for assistance.