#I WANT TO SELL MY BUSINESS PROFESSIONAL#

Once you know how much your company is worth, you can then determine if it’s time to sell your business and cash out now, or continue building for an increased future valuation.

#I WANT TO SELL MY BUSINESS PROFESSIONAL#

Consider seeking out a professional to get detailed help. A lot of training and professional standards go into determining this, so when the time is right to list and sell your business, don’t rely on 2.28 just because it’s the market average. Both of these professionals can look up the average market multiple for your industry and adjust it up or down based on the individual characteristics of your company and circumstance. You’ll likely need to see a business broker who has the certified business intermediary (CBI) designation, or a mergers and acquisition specialist. It’s key to determine what your market multiple is, and having access to successfully completed transactions is vital in this research. All you need to do to quickly determine the value of your business is to calculate SDE and multiply it by the average market multiple for your industry. Add-back expenses: $50,000 (these must be documented and justified).Let’s assume all those expenses add up to another $50,000. You also have some depreciation and interest, as well as retirement contributions. Following the advice of your CPA to lower your taxable income, you use the business to pay for your family health insurance, auto, gas and auto insurance. Let’s assume you have a salary of $50,000 per year.

This includes any personal, discretionary and one-time expenses, as well as one owner’s salary. If your profit and loss statement shows that you have a net profit of $100,000, you need to “add back” a couple of items. According to BizBuySell data, average cash-flowing businesses sold for 2.28 times seller’s discretionary earnings (SDE).įirst, let’s tackle what SDE is. Once you understand the math, you can apply this to your own business. The value of your business is tied to that value. The basic premise is to look at what companies similar to yours in size, revenue and other characteristics have successfully sold for. It’s quick and easy to understand, and you’ll know within five minutes what your business is worth (or at least a general range). Market Method: Let’s focus our time and effort on this method. Honestly, I feel tired and confused just explaining how it works. It involves discount rates, discounted cash flow calculations or capitalization of earnings. In short, you have to determine the business’s future economic benefit (forecasting financials), adjusting for growth rates, cost structure, taxes, working capital, etc., and then discount that future economic benefit to a present value. It’s not easy for most small business owners to understand, let alone calculate. Income Method: This method is a favorite for financial wizards and professors who love teaching theory.

I want to sell my business