How Much Could My Business Be Worth?

January 2020

You’ve thought long and hard about selling your business and think it may be time to take that step and move on, but of course you need to know… How much is my business worth?

Putting a pounds and pence figure on your business isn’t easy and the biggest imponderable factor is of course, how much a buyer is prepared to pay.

There are many factors to be considered … whilst multiples of earnings can be used as a business valuation method, be aware that there is no standard formula that can be used to value every business.

These multiples are generally based on what businesses have sold for in the past. Different industries have different multiples and within industries the multiples will also vary dependent on numerous factors.

As Business Transfer Agents please see below some of the most important other factors we consider when valuing a business.

Trading Accounts: 

We will always need to see historic and current trading figures, at least the last 3 years, to be able to accurately value.  It’s vitally important your accounts/vat returns etc are fully up to date.  Obviously the more profitable the accounts are the more your business will be worth.

REMEMBER:  Most buyers will have to gain finance to purchase a business and banks will need full & up to date accounting information to support any loan/mortgage.

Value of assets:

If there are premises involved in your sale, whether freehold or leasehold, then the condition and presentation of these along with the quality of fixtures & fittings to be included, is also of high importance.  Keeping your property and trading equipment in good condition and working order, should help increase the overall value.

REMEMBER:  Don’t give buyers any cause for concern.  Keep your premises clean and uncluttered.   Regularly maintain equipment and hold all service/guarantee documents on file as appropriate.  

People:  

How many staff and how experienced/loyal are they?  Is the business dependent upon your personal skills and attendance?  Are staff fully trained and capable?  Staffing is a major factor for value.

REMEMBER:  Buyers have a legal requirement to take on your contracted staff (TUPE).  Some may appreciate the assurance of taking over with the help of capable staff in place.  However, excessive staffing can be a serious turn off.  Redundancies can be distracting and costly, so do try and keep your business as lean and productive as possible.

Competitors:

Similar businesses/properties for sale and more importantly recently sold, are also to be taken into consideration when reaching a valuation. 

REMEMBER:  With internet access, potential buyers will find an abundance of information on-line and will no doubt conduct their own research in this way.

General:

There are of course many other factors to take account of, such as the geographical location and position of your trading premises, the local competition levels seen, customer base, lease terms (if appropriate), market conditions/state of the economy, Asset or Limited Company (share) sale etc.

REMEMBER:  The valuation of your business may also fluctuate depending on local and national market conditions, supply and demand, bank lending criteria, etc.

Whilst all the above is not an exhaustive list, it should give you an insight into what we have to take consideration of when valuing any business.

REMEMBER: Our overriding advice to you is … instruct a specialist Business Transfer Agent, get the business valuation right from the outset and your business will transfer and sell well.

As national business transfer agents for over 55 years, we are happy to provide you with a professional, free and no obligation valuation.  Contact your local office and take the next step forward to your future.

Mark Harrison, Director, EM&F S&W Wales Office  Tel:  01633 868609

 

 

 

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