14 June 2009
How do you value your business when it's time to sell
Jun/19/2009 13:02 Filed in: Store Closing
Sale
I
often get ask, "How much should I ask for my
business". In today's market that's not an easy
question to answer. Then again- it never has been.
Most people buy a business based on it's ability to
make a profit. Using that premise, the following
guidelines are a good starting place,
• An extremely well-established and steady business with a solid market position and whose earnings will not be dependent on a strong management team should be valued at eight to ten times current profits.
• An established business with good market position, with some competition and requiring continual management attention should be valued at five to seven times current profits.
• An established business with no significant competitive advantage, lots of competition and heavy dependency upon management skills should be valued at two to four times current profits.
• A small business where the current owner is the manager and sole decision maker should be valued at one times the current profit.
Most small retail businesses fall under the last category. They will always be better off running a Store Closing Sale and liquidating their inventory, fixtures and equipment.
• An extremely well-established and steady business with a solid market position and whose earnings will not be dependent on a strong management team should be valued at eight to ten times current profits.
• An established business with good market position, with some competition and requiring continual management attention should be valued at five to seven times current profits.
• An established business with no significant competitive advantage, lots of competition and heavy dependency upon management skills should be valued at two to four times current profits.
• A small business where the current owner is the manager and sole decision maker should be valued at one times the current profit.
Most small retail businesses fall under the last category. They will always be better off running a Store Closing Sale and liquidating their inventory, fixtures and equipment.