It can be easy to over-pay for a business in the private-sale market.
That’s because entrepreneurs have built them – sweated them out, and stayed with them through thick and thin. When it becomes time to sell, it’s natural for them to think that ‘now, I can be paid for this time’.
…well, not so fast.
A business’ value is influenced most by things like cash flow (reliable cash flow), customer lists, market share, and intellectual property, over the general ‘givens’ of sweat equity (which owners tend to value most).
Here’s a handy little tool to help give you an idea of what a business might be worth. While this is not comprehensive (eg, it does not include intellectual property, patents, customer lists, land, leases, etc), it does give you an insight into the valuation process.
If you’re thinking of buying a business…one of our certified valuators can help you evaluate its value, its potential, and who might be interested in buying it down the line. We can also help you value the intangible assets of the target, which may constitute the largest component of cost.