AdviCoach Reviews How to Determine the Value of Your Small Business When Selling

AdviCoach Reviews How to Determine the Value of Your Small Business When Selling

When it comes to selling your small business, the first step in the process is finding how much your business is monetarily worth. However, this process isn’t always made simple. In fact, according to the National Federation of Independent Business (NFIB) there are many ways to determine how much you should sell your business for. Defining the value of your business can be tricky, so today AdviCoach Reviews three common approaches for deciding what your business should be valued at. 

AdviCoach Reviews 3 Approaches to Determining your Small Business’ Worth
According to the NFIB, there are three common approaches that most professionals take when assessing the value of a business:

  1. Asset Approach: This is the easiest and most predictable approach out there, as it basically adds up each part of the business to a total valuation.
  2. Income Approach(es): These methods tend to be more complicated because they add in more technical aspects of a business such as future cash flow and multipliers. In short, these methods determine a small business’ value by calculating the net value of the small business’ benefit stream.
  3. Market Approach(es): Similar to the income approach, these methods tend to be a little more difficult because they takes into account the current state of the market and other comparable elements. With a market approach method, small business owners determine their business’ value by comparing itself to similar business that may soon be sold in the same industry to determine the size of the opportunity.

When specifically looking at the sale of a small business, there isn’t always one clear approach that is better than the other. If possible, the NDIB recommends to try creating a valuation of your small business using each approach, ultimately going with the number that shows the highest value. However, as a small business owner, you may not have all of the resources or knowledge to create each of these valuations. For this reason, Curtis Kroeker, president of marketplace verticals for CoStar Group Inc., which operates sites like BizBuySell.com and BizQuest.com, recommends using a market approach.

“Even in a more sophisticated valuation, an appraiser or business broker will take multiples into account—although that’s just one of the things they’ll consider, as they’ll base their final estimate on more specific details [after] working with the seller to determine what is the real cash flow of the business,” said Kroeker.

Resources Available to Small Business Owners
There are other resources out there for small business owners to use as research tools when looking at similar businesses that have recently sold. For example, Business Valuation Resources gathers historical information about businesses that have recently been sold and configures norms for some industries. CNN Money also has great tools and resources available to help small business owners who struggle with accounting determine what they should set their valuation at.

Call An AdviCoach Today!
Planning an exit strategy is easy, but actually carrying it out accurately isn’t always a piece of cake. Each small business coach at AdviCoach is trained in guiding small business owners through the act of succession. For more information about how an AdviCoach can help you figure the worth of your business and help you in planning and carrying out an exit strategy, call an AdviCoach small business coach today.

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