But this can be a tall
order especially if a seller hasn’t prepared
the business for the inevitable (i.e. exiting)
and has little evidence, to substantiate an ambitious
asking price.
Further, going
it alone without the help of a professional broker
may mean selling the business short, in more ways
than one.
One of the primary
things a professional broker should advise on,
is the business value. There are countless ways
to calculate value, but a good advisor will guide
you towards one most relevant, ensuring maximising
the selling potential and be able to justify it.
For example, experts say there are
two main methods to valuing an owner-operated
business; the asset and earnings approaches. |
Balance
Sheet |
The asset approach uses the company's
balance sheet to establish overall value. This
is a more simplistic approach involving an add-up
of the total worth of assets, then subtracting
the total liabilities to derive a figure. Some
believe this method is more appropriate for businesses
with a large fixed asset base.
However, the most common method used to value
a business is still the earnings approach (or
variations of). The earnings approach assumes
that worth is based on what a business earns.
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