5 Factors that Determine the Value of Your Small Business for Sale in Keller, TX
You think that it is time to sell your small business and get a decent price for it from interested buyers. While going through the early troubles, you stop and ask yourself: ‘When was the last time you thought about the value of your business?” If the answer to this question is ‘I don’t know’, then you do rank among many other entrepreneurs who want to sell their business but are clueless about its value since they haven’t done a valuation for ages.
Unfortunately increasing the value of your business is often left too late if you remember it when you are planning to sell it off. However, you can reach to a consensus on the value by studying factors that have an impact on the price that your small business for sale in Keller, TX would bag from buyers. Although no business valuation is perfect, a majority of the buyers will take into consideration the following aspects while offering a price for how much they consider your business to be worth.
Historical Financial Performance
Business buyers are really interested in looking at and studying financial information pertaining to how your business has performed during the previous 2-3 financial years. Once they have all the financial information with them, they would thoroughly study it to find downward and upwards trends in the statements to assess the current standing of your business. If your financial records suggest that your revenues have been going downwards while the expenses have been going upwards, the buyer might not have a good first impression of the business.
Since revenues and expenses form the profitability of a business, most buyers would want the previous trends to be positive in increasing the profits. Revenues sliding upwards and expenses sliding downwards will be perfect for wooing the interest of the buyer. Having strong financials can play an important role in increasing the overall perceived value of your business in the eyes of the buyer. On the contrary, declining revenue can have a negative impact and may change a buyer’s decision to buy your small business for sale in Keller, TX.
Future Growth Potential
Other than just knowing the figures related to the growth of your organization in the past, many buyers are also concerned about the future growth potential that is predicted for your business. Now, this aspect of value is often quite broad and may require an in-depth study of the industry you operate in. If you operate in an industry that is currently dwindling, your business may not attract consumer attention despite there being no such mistake on your part.
The study of a business’s future may involve questions such as; what are the key trends set to impact or affect your industry in the future? How will the revenues of a business react to certain change in trends during the future? What are the projected revenues supposed to be with the current set of infrastructure within the organization? What would be the affect on profitability if the new owners implement strategies that are not being currently employed by the owner? All these questions pertaining to future growth will have a huge impact on how the buyer perceives the value of the business and what can be done to increase it.
Size of Customer Base
For those of us who are looking at this through an accounting perspective, the customer base you have is considered as your goodwill. The value of your brand and how compelled customers are on buying your products/services are important factors in setting a value for this. Goodwill is often said to be the difference between the accumulated sum of all assets and revenues owned by the business and the selling price it has.
Since the business is currently operating, you would ask potential buyers for an enhanced amount that is more than just the value of all assets. This would be to accommodate for the goodwill your business has achieved over the period of time. Considering its intangible nature calculations pertaining to goodwill are the major source of debate while setting a value for the business. A business might be doing well, but what if it has just one client to boast of? In layman terms, if that one client leaves the business might end up losing almost all of its business. So, buyers study the consumer base in detail before they plan to buy a business.
Dependence on Top Clients
An aspect closely related to what we mentioned above is the dependence of a business on the top clients. To better understand this concept we can talk about the percentage of the revenue that comes from the top 3-5 clients. Buyers wouldn’t want to buy a business that is overly dependent on all of its top clients and does not have a good rapport to boast of besides that. A company that has 90 per cent or more of its sales coming from the top 3 clients would not be able to garner a good price. The less you are dependent upon your top clients, the more likely you will be to get a better business valuation.
Dependence on Owner
Another important factor that can impact the overall price that your business bags when it is set up for sale on the business for sale market is its dependence on the owner. The owners for most small businesses may not want to stay with the business once it is sold, so the dependence of a business on its owner can often be a negative aspect in setting the value for it. On the contrary businesses that run based on the cumulative effort of everyone involved will bag a better offer based on how easy it will be for the new owner to settle in.
Setting a value for your small business for sale in Keller, TX is not an easy task. You can get the help of Kirksey Business Brokers to reduce the hassle of the task and to sell off your business at a good value.