How much is your business worth?
If you are planning on selling your business in Colleyville and its surrounding areas, you have to set an appropriate price that will incorporate the profit you expect. But before you can sell your business, you have to ask yourself a crucial question: what is the value of my business in Colleyville? There a lot of aspects that have to be considered in order to find out the true value of a business. Given below are a few steps on that answer the question ‘what is the value of my business in Colleyville?’:
1) Organize Your Business Information
You will have to organize all of your businesses information if you want to know ‘what is the value of my business in Colleyville?’. Firstly, it will help with understanding your business’s true value and secondly, buyers often request if they can value your business themselves, which cannot be done without all of your data being organized and in one place.
Below is some of the information you will need.
Finances and assets
- Financial statements including your yearly balance sheet.
- A list of all your physical assets.
- A list of all the other assets i.e. goodwill and debts.
Legal information
- Legal paperwork which includes a variety of things from leases to insurance policies.
- Business registration papers which include name certificates and intellectual property.
- All other documents such as trademarks and patents.
Business profile and plans
- Market conditions which include trends of the customer.
- How your business compares to your competitors.
- Business history. This includes information like when the business was launched.
- Marketing and growth plans.
- Emergency management details.
- Standard details such as the business operating hours and information regarding the premises.
Inventory, Venders and Customer Information
- Information such as pay roll structure, employee entitlements and the job descriptions of the current employees.
- Tender or vendor details which include the contract with the venders that shows the supply details and the price.
- It is also important to accumulate as much information as you can, regarding your customers such as current demands and the customer profiles.
Once you have organized all of the information above, you can move on to the next step which is given below.
2) Consider getting professional advice through a third party
Taking advice from a professional has a lot of advantages. These include bankers as well as financial advisors, as they can help analyze the data and identify market trends, helping you discover ‘what is the value of my business in Colleyville’ more appropriately.
Furthermore, they can help you quantify intellectual property such as good will. In most cases, the sheer amount of data accumulated, makes it very difficult to set a value for your business. A professional will make the process much easier for you.
Another advantage of hiring a professional is that they may already have a whole list of clients who might want to buy your business. This will no doubt save on advertising costs. But, on the other hand, hiring a professional does not come cheap.
Once you have decided whether you will seek professional advice or not, you can move onto the next step.
3) Choosing the best business valuation methods
Once your data is organized, it is time to choose the business valuation procedures. There are a number of ways to determine business value. Bear in mind that there is no one single set method and a combination of these methods will help you decide your desired sale value.
If you have hired a professional, they can help you determine which method is the most appropriate for your business portfolio.. Sometimes, potential buyers even prefer a method different from the one you have chosen.
Furthermore, you have to take into account what industry category your business falls into as well as the market value of your competitors. Some industries have even invented their own methods to value a business, so conducting research about the industry you are in is crucial.
The list of methods is not exhaustive and is given below:
Return on investment method
This is calculated through the formula ROI=(net annual profit/ Selling price) x 100. This method is generally used by most industries and can give you the exact value of your business.
Calculate business assets
This is calculated on the basis of business assets. Here are two different ways to use this method:
- Market value of assets – Liabilities
- Market value of tangible assets + Intellectual property
Intellectual property is not a tangible asset and is difficult to quantify. There any many methods that can be used to calculate intellectual property such as goodwill, but all of these methods are very complex as these assets do not have a determined market price.
For all of the assets, market price should be set keeping depreciation into consideration. Over a span of time, the net worth of assets decreases, so what you paid for an asset a year ago, will be different from what it is worth now.
Find out the cost of starting your business
The cost of starting your business all over again can be used as a deciding factor for how much your business is worth. This method requires you to calculate all fixed and variable costs of starting your business from scratch. You will have to be very careful that all costs are included. The disadvantage of this method is that it does not take into account intellectual property and costs will differ due to depreciation.
Future profits of your business
An estimation of future profits has a huge impact on business value as potential buyers will prefer those businesses that can prove that the business will reap profits in the near future. This forecast can be used to give your potential buyer an idea of the benefits they can reap with the purchase.
Future profits can be estimated through sale records and market trends. Similarly, by forecasting profits, you can compare your competitors and get an idea on how stable your business is in the market. They can play a major role when negotiating your price while selling the business.
All the information above is everything you need to know in order to answer the question ‘what is the value of my business in Colleyville?’. So, get started to value your business for its correct price now.
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