Pricing the Business
Pricing a business what is known as business valuation. Business owners will usually use an intermediary such as an accountant in order to get the most accurate business valuation. This is because business valuation is a hugely complex issue involving a number of variables and assumptions such as;
- The recent profit history of your company
- General condition of your company. For example the condition of your facilities, books and records
- Market demand for the particular type of business
- Economic conditions; the cost and availability of capital and any economic factors that directly affect the business
- Ability to transfer goodwill or other intangible values to a new owner
- Future profit potential
These six factors determine the fair market value. Fair market value is important because overvaluing the business will discourage buyers.
A good way to ensure a high price is to create competition between potential buyers. You can reject any bids that fail to reach your estimated value, obliging other bidders to increase their offers.