How Do You Sell A Small Business?

How much do you sell a business for?

There is plenty of room for judgment, but by and large, a profitable, reasonably healthy, small business will sell in the 2.0 to 6.0 times EBIT range, with most of those in the 2.5 to 4.5 range. So, if annual cash flow is $200,000, the selling price will likely be between $500,000 and $900,000.

How long does it take to sell a small business?

Although the average time to sell a business is 6 to 9 months, there are steps that buyers, sellers, and business owners can take to speed up the process. If you are selling your business, and the time it will take to sell it matters to you, consider the factors in this blog when choosing a business broker.

How do you sell a struggling business?

However, there are some specific considerations worth highlighting that will help you through the sales process.

  • Clear Litigation and Large Debts. This is a crucial first step on your way to selling your failing business.
  • Identify Why Buyers Might be Interested.
  • Be Honest and Open.
  • Consider Separating Assets.
  • Be Patient.

What is the rule of thumb for valuing a business?

Use price multiples to estimate the value of the business.

Another valuation rule of thumb is using price multiples, which base the value of the business on a multiple of its potential earnings. For example, nationally the average business sells for around 0.6 times its annual revenue.

How is a small business valued?

Most small companies are valued using one or more of the following methods, all of which take into account the company’s historical earning power: debt paying ability; capitalization of earnings or cash flow; or. gross income multipliers/capitalization of gross income.

How do I sell my business privately?

If you’re considering selling your small business, consider these seven steps to stay on the offensive.

  1. Determine the value of your company.
  2. Clean up your small business financials.
  3. Prepare your exit strategy in advance.
  4. Boost your sales.
  5. Find a business broker.
  6. Pre-qualify your buyers.
  7. Get business contracts in order.

How do I sell half of my business?

Selling half of a corporation is different from selling half of its assets. Because your business is incorporated, you own shares in the corporation and the corporation owns the assets. For this reason, you must execute a share transfer agreement to sell your half of a corporation.

How can I sell my business fast?

The seven steps to sell your business fast:

  • Prepare a Business Summary.
  • Market your business aggressively.
  • Screen buyers and email them your Business Summary.
  • Meet with qualified buyers and screen them appropriately.
  • Accept an offer.
  • Manage the due diligence process.
  • Handle the closing.

Can you sell a closed business?

While bankruptcy is a last resort that you can use, you may be able to recoup some of your losses and find a smoother exit by selling the business. Alternatively, you can close down the business and sell off the assets, which may give you enough in return to pay off creditors without formally filing for bankruptcy.

Do I need an attorney to sell my business?

Selling or transferring a business can be a lot of hard work. You may need to hire a qualified business lawyer if you need assistance with the process of selling a business. Also, if you need to go to court to litigate a legal issue, your attorney can provide you with representation during those meetings as well.

How do I calculate what my company is worth?

There are a number of ways to determine the market value of your business.

  1. Tally the value of assets. Add up the value of everything the business owns, including all equipment and inventory.
  2. Base it on revenue.
  3. Use earnings multiples.
  4. Do a discounted cash-flow analysis.
  5. Go beyond financial formulas.

What is a fair price for a business?

The fair selling price for a business is the amount the seller is willing to take and the buyer is willing to pay. When buying a business, you cannot compare similar locations, as two identical businesses located side by side could be worth totally different amounts.

What is the formula for selling a business?

Consequently, only use this valuation formula if the comparison company is quite similar to the owner’s company. Market approach – profit based. Compare the company’s profits to the sale prices of other, similar companies that have sold recently. For example, a competitor has profits of $100,000 and sells for $500,000.

What is the multiplier for selling a business?

Intensive businesses, such as independent restaurants and auto repairs shops, that tend to wear down an owner often sell for 1.7 to 2.5. Profitable retailers often have a multiplier of 2 to 3. Service businesses with repeat customers sell around 3.