Valuing your business
Unfortunately, there are no hard and fast rules when it comes to determining the value of your enterprise, particularly a private business, but there are some guidelines suggested by those in the know.
As a crucial starting point, you need to be clear in your own mind about the amount you wish (or need) to realise and the best way to manage the sale ahead of exit negotiations.
But – and it’s a big, obvious but – your business is only worth the sum a buyer is prepared to pay, so you and your advisers should try to be objective. Aside from the financial calculations you can make, you will want to incorporate some estimate of inherent value, from goodwill or established systems. Here, it’s all too easy to be blinded by an emotional attachment into believing your business is worth far more than it really is when passed on.
Another consideration at the start is whether you and other key staff will be staying on as part of the sale or if you wish to exit the business entirely. This can be a major factor determining value.
Helpfully, there are a variety of valuation models used by different industries and sectors, which can give you an ‘objective’ measure of the worth of your business.
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