Several key factors will set the baseline for any business sale, and one of these is the asking price you initially lay out for your business when you list it on the market. Once this price has been named, one of the important tasks you'll be faced with moving forward is justifying that price to possible buyers -- buyers who are, naturally, looking to get the best deal they can.
At Utah Business Consultants, we're here to help. We assist clients with every aspect of selling their SLC business, including help with both setting and defending an initial asking price on the business as a whole. What are some of the basic financial and related tools that will help you both arrive at and justify your asking price when in negotiations to sell your business? This two-part blog series will go over several.
Basic Financial Statements
First and foremost, some of your most important resources for both arriving at and defending your asking price will be your business' basic financial statements. These include items such as:
- Your balance sheet, which outlines all of the assets and liabilities associated with your business
- A profit and loss statement, detailing your business' income and expenses over a set period of time
- Documentation of any outstanding loans or other debts still owed on the business
These financial statements will give both you and potential buyers a clear idea of the value of your business, as well as what they might expect to see in terms of return on investment if they were to purchase it. With this information in hand, you can start to get a feel for what an appropriate asking price might be.
In addition to looking at your business' financials, it's also important to do some basic market research to see how your business stacks up against others in terms of size, scope, and profitability. This will give you a better idea of where your business falls in terms of value, and can help you to determine a realistic asking price.
Once you've done your market research and financial analysis, you'll be in a much better position to set an appropriate asking price for your business.
Tangible Asset Value
Next up, you need to also take into account the value of any tangible assets associated with your business. This might include things like equipment, inventory, real estate, and more. These items need to be valued separately from the business as a whole in order to get an accurate sense of what they're worth -- after all, not every buyer will be interested in taking on these assets, so they shouldn't be included in the asking price for the business itself.
In part two of our series, we'll go over some additional themes like discretionary earnings, earnings multiples and more. For more on how to justify your asking price during a business sale, or to learn about any of our SLC business broker services, speak to our team at Utah Business Consultants today.