To get started, compare prices of similar businesses. BizQuest offers a valuation tool that you may utilize to determine an asking price for your business select the Buy a Business tab selecting “Value a Business”. Popular valuation methods include:
- Income Valuation Approach: This method analyzes the business’s past, present and future revenue and cash flow, and bases the price of sale on what kind of return the buyer can realistically expect.
- Asset Approach: This method determines the value of a business based on the fair market value of its assets less its liabilities. Assets include tangible items such as furniture, inventory and real estate. Intangible items such as trademarks, customer lists or permits can also make a business more appealing and should be included in this valuation method.
- Market-Based Approach: This method uses comparable recent sales to estimate the value of a business. By searching the records of recently sold businesses whose location, sales volume and number of employees are similar to yours, it’s possible to come up with a fair asking price.
- Industry Formula Approach: There are many formulas that can be used as a guide to calculate a rough estimate of your business’s value, such as three times the earnings averaged over the last three years, or two times the book value of the company. These formulas are very industry-specific and are best used as a starting point when coming up with a selling price.