How Much Can I Sell My Business For Calculator – Over the past year, I’ve met a lot of small business owners who have just gotten an appraisal, and often, the number in their head is higher than a professional appraisal or opinion of value. This makes the process of selling your business more difficult. Not only are you parting ways with a company you’ve filled your life with, you also want to make sure you’re getting the best possible deal and fair value for the company. On top of that, you are selling your business for the first time. This problem inspired us to launch Batten, a marketplace for small business acquisitions and more.
If you are considering selling your business you probably have a lot of questions and concerns. Many business owners we work with ask, “Well, I’m selling my business… how much is it really worth?” wondering that. Or, perhaps your questions center around the logistics of closing the deal. Or, perhaps, you’re unsure of your next steps once you’ve decided to move forward with the sale.
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We launched Batten to support you no matter what stage of selling your business you are currently at. You don’t have to navigate this daunting process of selling your business alone.
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There are plenty of resources available to help you market your business to the point where it’s huge. That’s why we’re breaking down the process of selling your business, highlighting common questions and considerations.
You have invested years of your life into growing this company; It’s understandable that you want to get the most bang for your buck and make sure you get the best deal. “Is my business worth selling?” We answer questions like “How do I prepare the finances” to “How do I close the deal?”
Let’s dive in to answer your first question: How do you evaluate whether your business is worth selling?
There are many reasons why small business owners may consider selling their business. Some small business owners want to try something new and reinvest the profits from their first company into a new venture they are passionate about. In other cases, the small business is experiencing cash flow problems or there are financial risks that the owner is unwilling to take.
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Alternatively, some decide it’s time to say goodbye to their company if they want a guaranteed payout as opposed to rolling the dice to see what the future holds. In other cases, the owner is retiring and selling the business marks the end of his career.
Sometimes, a case may need to be made to keep your operation alive. For example, if sales have declined in recent years and you strongly believe you can improve the business’s cash flow in a reasonable amount of time, it may benefit you to make some changes before selling.
Other times, you have to let industry or global trends play out. Take, for example, the COVID-19 pandemic. Small businesses were disproportionately affected, which negatively impacted cash flow, buyer demand and business sales prices.
We encourage you to first evaluate why you are selling your business. Try to consider what you stand to gain – or lose – by letting your business go. Once you’ve decided you want to continue to consider selling, your next steps await.
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We’ve outlined the steps you can take once you’ve decided to sell your business. The first step centers around ensuring you know what your company is actually worth – so you can be confident you’re getting more for it.
The first step is to get a business valuation – in other words, determine how much your business is worth. This is a critical step in the process for several reasons.
First, it gives you a greater perspective on how much you can get for the sale of the business. Second, it gives you leverage when you’re considering offers. A business with a proven track record of bringing in strong profits will sell more easily than one without such a track record.
It’s one thing to say you’re going to determine how much your business is worth, but quite another to know how to go about it. It all comes down to different assessment methods. Some of the most popular methods are:
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When deciding which valuation method to use, it’s important to consider things like net income, company assets, and the current market. If you’re not sure which valuation method is right for your business, partners like Batten can help.
You have a clear picture of how much your business is worth, thanks to the research you’ve done and the time you’ve taken to put it all together. Now, what’s your next step when it comes to selling your small business? It’s officially time to start preparing your finances.
If you don’t already have an accountant or bookkeeper, working with a financial professional can help ensure your books are clean. While most small business owners run personal expenses through their company, you should be sure to normalize your profit and loss statement. It shows what the business produces.
When you complete your financials, you should have all of your sales and profit history. The more financial documents you can provide, the better. Buyers can expect to see profit and loss statements, bank statements, balance sheets and tax returns.
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If your business is not in good financial shape, you can consider pricing accordingly – to demonstrate that you are aware of the risk any potential buyer is taking by purchasing the company.
If you’ve had your business for several years, you can provide them with net profit over a specific period to increase their understanding of how much revenue the company has generated.
This brings us to our next point: cash flow. Cash flow refers to the movement of money in and out of a business. This is often discussed in relation to liquidity. With the help of cash flow statements, your potential buyers will gain insight into whether your business is generating enough revenue to cover expenses. Provide insight into the annual cash flow of the business and give them a free cash flow overview.
Seller’s Discretionary Earnings (or SDE) is a calculation of the total financial profit a full-time owner receives from a business annually. Sometimes you may hear this as adjusted cash flow. Keep this in mind when we discuss how much to price your business.
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Get this information – we’ll refer to it later! When you calculate the SDE, you need to determine a reasonable coefficient to apply to your earning stream. Multiples are usually 2-3x, however, this varies. You can even see it reach up to 4x if your business is doing really well.
You’ve completed the business evaluation process, prepared your financial statements and due diligence documents, and now you’re ready to begin the next step of selling your small business.
A good broker will be able to handle a lot of the nitty-gritty of selling your business, allowing you to keep your focus on running the company. Trying to sell a business can be a full-time job, and while you’re still in the process of keeping your business up and running, it can be quite demanding. A great broker will be able to effectively market your business and generate new demand from their network of buyers.
There are also pitfalls to working with brokers – brokers aren’t cheap and may charge retainer fees and often take a percentage of the deal, anywhere from 10%-20% is standard. Moreover, if you don’t have a good sense of your valuation, the broker may promise you a higher price to lock in a special deal, only to lower the price.
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Here at Batten, we’ve always prided ourselves on being on the small business owner team – that’s why we start with impartial and complimentary business valuations, support you wherever you are on your journey and never charge an owner. If you decide to work with a broker, Batten can connect you to their vetted broker network.
Now it’s time to officially list your business. We encourage you to use the online marketplace where potential buyers can review listings. When you list your small business on Batten, your company will be viewed by qualified potential buyers. Through Batten, buyers have access to financing and purchase protection, making our marketplace an ideal place to sell.
You’ve decided to list your website on Batten’s Digital Marketplace. what now Time to figure out your exit strategy and when you’re going to sell. Deciding when is the right time to sell your business is not easy.
There are several other indicators that mean your business is in a good place to sell: your finances are on the up, your team is stable, your products are in high demand,
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