What Is My Business Worth?

How buyers put a value on a business

Most owner-run businesses are valued on their profit, not their turnover. The figure that matters is sustainable, provable profit: what the business reliably earns for its owner, year after year. A buyer takes the net profit and adds back the items that will not carry over to them, such as the owner’s salary, once-off costs and personal expenses run through the business. That adjusted profit is then multiplied by a figure that reflects how safe, and how transferable, the income is.

What moves the value up or down

• Clean, provable financials for at least the last three years.
• Income spread across many customers, not one or two big ones.
• A business that keeps running when the owner is not there.
• A secure lease with years left on it, and a trained team that will stay.
• Steady or growing sales, rather than one good year followed by a slide.

Assets and other methods

Some businesses are valued mainly on their assets, where the equipment, stock or property carry most of the worth. Others are measured against what similar businesses have recently sold for. A proper valuation usually looks at more than one method and settles on a realistic range, not a single fixed number.

Why owners and buyers disagree

Owners tend to price on effort: the years, the late nights, the reputation built. Buyers price on future profit and risk. They are paying for what the business will earn them from tomorrow, not for what it cost you to build. That gap is the single biggest reason businesses sit unsold. Price too high and serious buyers walk past. Price too low and you hand money away.

The safest first step is an honest, independent appraisal before you go anywhere near the market. It tells you what your business is worth today, what is holding the figure back, and what you can fix to lift it before you sell. A good broker gives you that number straight, and helps you build the case that supports it.

Whether you are considering selling your business, need a professional business valuation, or are looking for your next acquisition opportunity, our experienced business brokers are here to assist. Contact us at aldes@aldes.co.za or visit www.aldes.co.za to take the next step.