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How to value your business

How to value your business

Recent research revealed that a third of the UK's medium-sized business owners are thinking of selling their ventures. A surprising statistic you may think.

But what was more concerning was the number of survey respondents who were unsure about the process. Almost 4 in 10 were worried that they wouldn't be able to sell their business fast enough while 34% were apprehensive about selling it too quickly.

It's true that these findings are based on a survey of 500 people and cannot be said to be fully representative of businesses in the UK.

However, the problems that established businesspeople were having surprised us a little. We forget that there are many great businesspeople out there, but not all of them think about leaving their business.

Whether you're planning to retire or just want a change of scenery, having a watertight strategy is imperative for when you come to sell your business.

Valuing your business

Determining the value of your business is a crucial part of a successful exit strategy. The only way to do this is by conducting a detailed valuation of the business and its assets.

What makes your business valuable?

There are a lot of factors that you need to consider when valuing your business:

·         Size

Purchasers will usually pay less for smaller businesses than larger firms due to the increase in perceived risk.

·         Profitability

The amount of profit generated by the business is a major determining factor. Generally, the more profit you generate, the more the buyer will be willing to pay.

·         Future prospects

Purchasers are likely to pay more for a business with higher projected growth rates. A brighter future almost always equals a more valuable business.

·         Unique assets

Your business will be more valuable if you have assets that set it apart from other businesses. Think intellectual property, skilled employees and important connections.

Getting the most for your business

Here are some tips to ensure that you maximise the value of your business.

·         Think ahead

Plans should be made as far in advance as possible. The more time you have to plan the process, the easier it will be to market your business when you want to sell.

·         It's all in the timing

Timing is everything when you're aiming for a good deal. You're not going to get the price you want if you try to sell during poor trading conditions. Try to sell when your results are good and the environment is right.

·         Raise awareness
If no-one knows that your business is on the market, you can't expect to sell it. Advertise the opportunity to attract as many potential buyers as possible. The more competition there is, the better your negotiating position will be.

·         Eliminate risk

As we've seen, a riskier business invariably results in a cheaper business. Increase your businesses value by eliminating potential risks. Protect your trademarks and intellectual property. Speak to key employees. Widen your customer base. Try to mitigate all potential sources of uncertainty.

Get in touch

We can help you plan every aspect of your exit strategy; from succession planning to valuations to the tax implications of selling a business.

Fill in our contact form, call 01628 631 056 or email geoffk@knightandcompany.co.uk to start planning your exit strategy.