What Is My Business Worth?
The #1 question business owners generally have when it comes time to sell a business is: "What is my Business worth?" Of course, everyone knows the value of anything is what a willing buyer will pay and what a seller will accept, but valuing a business does go way beyond the scope of the ordinary. There are many facts and a number of myths that are typically discussed when talking about business value. One myth that surfaces in many conversations, which is almost always false, is that a business is worth 3 times the amount of gross annual sales. Such myths and fallacies often make it difficult for a business owner to implement an exit strategy when the time to sell does arrive.
Business valuation is as much an art as a science and every business and each industry can be a little different and have its own nuances. These differences make it near impossible to use a "one size fits all" approach, although most industries do have one or more "rules of thumb" that can be used to help determine the true value of the business. Business uniqueness and variables from industry to industry further complicate the business valuation process which is why business valuation are typically done by highly qualified individuals who have the knowledge and resources to form an objective opinion of value. While business valuators do employ standardized formulas and methods to calculate value, they also work from assumptions that are based on experience in the market place and familiarity with similar businesses.
Whether to change a career path, relocation, or retirement, for many business owners, knowing the value of their business can be the first step for creating a good exit strategy.
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