How to sell your business

You want to sell your business, and we want to help you!

First step? Know what to ask for.

Your business means a lot to you (and us), but you're going to need an objective valuation if you want to sell quickly and get a reasonable price. Over and underestimating your business's value can slow down the process or make it more expensive

There are several ways to value your business, and it's essential to choose the one that suits your situation best. You'll need to analyse your sales, profit projection, tangible assets, employees and more

1. DCF (Discounted Cash Flow)

Using DCF is best suited to businesses that have an established or growing earning. To figure out your DCF, you're going to need to make some predictions about your business' future revenue and profit.

From there, you can put a number on the value of your business. This valuation method takes into account inflation and investment value so that it will give a fairer result.

2. P/E Ratio Valuation

The Price to Earnings (P/E) ratio considers the multiples of profit of your business and is suitable for well-established companies and have a well-tracked profit.

Work out your P/E ratio: divide your current share price by your earnings per share (EPS). Then, you can multiply your post-tax profits for the year by your P/E to work out a valuation

3. Entry Cost Valuation

You could value your business based on what the cost would be for someone starting an identical one. You're going to need to work out the total start-up costs and all of your tangible costs. Make sure to include any expenses that concern your working capital, product development, recruitment and training.

This is an excellent method for a start-up that hasn't developed a steady cash flow or a business that has seen a decrease in income.

4. Asset-Based Valuation

If your business is predominantly tangible asset-based like a factory or property firm, this is probably the method for you!

Your first step would be to work out the NBV (Net Book Value), which will tell you the total for the assets listed on your business accounts. It will also adjust their price according to their age and current market value.

Importantly, you'll need to discount any outstanding debts that you won't be paying off before the sale

5. Turnover Valuation?

A turnover valuation is based on your business' current sales as this is considered a good indicator of how well your product or service is performing. This is a helpful starting point for a valuation but is often part of a more extensive valuation as a business has a lot more to offer than just its product/service!

This type of valuation is suitable for a younger business that doesn't have a comprehensive set of company accounts or a less complicated older business, e.g. smaller high-street retailers.

For this type of valuation, you'll need to:

  •  Work out your average weekly sales: calculate your weekly turnover within the most recent financial period. If possible, add this to the turnover of the last financial period. Excluding the VAT from your calculation, divide your sum by the total number of weeks in both periods.

  •  Establish your weekly multiple: this is the % of the annual revenue equal to a fair value turnover. This will vary based on your sector. This will be roughly 20 weeks if you have a cafe, while a beauty salon will be around 10-15.

  •  Multiple your sector value by your average weekly sales figure.

How can I save money?

If you're selling or buying overseas, then it's a good idea to bear in mind transfer and exchange rates so that you're not losing any money. We recommend our personal or business accounts to reduce fees and currency exchange loss.

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