You, as the seller, will set the price of your business but ultimately the purchaser will determine the value.
At the end of the day, a business will sell for a price the purchaser is prepared to pay and the business owner is prepared to accept.
Remember, the price being asked for your business may have very little to do with the price for which your business eventually sells.
Factors which have little or no effect on your business worth are as follows…
The amount you originally paid for the business
The amount you owe on the business
The amount you have spent on improvements
The amount of money you need to embark on your next project
The amount someone else got for their business
All of the above may influence the asking price that you set, but from a purchaser’s perspective they have little or no bearing on establishing your business worth. A purchaser always values the business based on ‘what is in it for them’.
Over the many years that I have been selling businesses, there are four valuation methods that have worked for me. These relate to the type of business being sold.