Why You Need a Business Valuation Before You Sell
Before you advertise your restaurant, bar, cleaning service, car wash, or whichever type of business you have for sale, conduct a business valuation. However, even with all the formulas available on the internet, it is still better to call in the experts. An experienced business broker will be able to assist you with an independent business valuation, as this provides the credibility required by prospective buyers.
Below are some of the reasons why you need to have a business valuation conducted before you try to sell your business.
Input from a Neutral Party
Many sellers expect prospective buyers to take their financial records at face value. Others don’t have any financial records and simply expect people to take their word for what the income, expenses, and net profit are without proof of the validity of their figures. Don’t be one of those sellers. If you have no means by which to prove the profitability of your business, you certainly need to have a business valuation conducted by a valuation expert or business broker. Your word is not worth anything to the person who has to pay large amounts of money for your business. The business valuation expert can help to determine the value of the business and thus also help you set a realistic selling price.
Identify Problem Areas and Opportunities
Your business may have assets that you have never realised are worth anything. Did you know that having a website with high visitor numbers could add value to your business? The signage, supplier lists, customer database, and existing contracts, as well as debtor books, could also add value to the business increasing your goodwill. The independent business valuation expert can help you identify assets and opportunities that you may not have thought about previously.
Identify Accounting and Tax Problems or Errors
You may undervalue the business because your books show that the business doesn’t make a profit, even though you benefit from the income generated by it. An independent valuation expert can identify bookkeeping errors, such as the duplication of expenses.
Don’t rely on hearsay or rule of thumb in setting the selling price. Your business has specific characteristics, assets, and issues. Relying on a one-size-fits-all market multiplier to get to the right price is a mistake. If you are unfamiliar with the value of an item, then it is difficult to determine if the asking price is market-related.
Get expert help in setting the selling price. Call on us for business valuation services.