Quick Answer: How Much Should I Sell My 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 do I calculate the value of my business?

To find the value of your business, subtract liabilities from the assets. For example, if you have $100,000 in assets and $30,000 in liabilities, the value of your business is $70,000 ($100,000 – $30,000 = $70,000). With the asset-based method, you can find the book value of your business.

How many times earnings is a business worth?

Bizbuysell says, nationally the average business sells for around 0.6 times its annual revenue. But many other factors come into play. For example, a buyer might pay three or four times earnings if a business has market leadership and strong management.

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 do I sell my small business?

Make selling your small business easy with these seven steps.

  • Determine the value of your company.
  • Clean up your small business financials.
  • Prepare your exit strategy in advance.
  • Boost your sales.
  • Find a business broker.
  • Pre-qualify your buyers.
  • Get business contracts in order.

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 are the three methods of valuation?

When valuing a company as a going concern, there are three main valuation methods used by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions.

What is the tax rate when you sell a business?

When selling business assets, the federal tax rate on gains can vary from 15% (long-term capital gain) to 35% (ordinary income rates).

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.

How much does a small business valuation cost?

Business valuation prices can vary dramatically from firm to firm. This is due to a provider’s areas of expertise, available resources, geographic restrictions, infrastructure, etc. Traditionally, professional business valuations will cost anywhere from $6,000 to $30,000+ based upon complexity.

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.

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.