Home Entrepreneurship Evaluate Your Business before Selling it Up

Evaluate Your Business before Selling it Up

by Olufisayo

“Business is a combination of war and sports” ~ Andre Maurois. It can be challenging, fearsome, dangerous, profitable and prosperous or could even end you up being bankrupt. It’s an intelligent sport that is also a mind game and a fierce war that calls for a lot of controlled aggression.

Selling your business is sometimes as tough as managing or creating it. Here let us have a brief discussion on what one needs to care about for years or months before selling up a business.

(A)  Key factors that affect the value of your business are

1. The financial part of your business is the crucial decider of its value. It involves

  • Cash flow and profits in the past, the present, and the future.
  • Cost cuttings and how well you control the capital expenditure for the future is another deciding factor.

2. The outside Factors

  • The economic status of the business including the interest rates and the demand in the market
  • It is important to study the value of competitors in the market and also get to know the potential buyers interested in your business.

3.      Intangible Factors

    • Patents, Goodwill and other intellectual properties is yet another deciding factor.
    • The strength of your customer relationship can make or break the business.
    • The growth potential of your business.

4.      The Assets and Liabilities Factor

    • The Value of all your movable and immovable properties.
    • The Level of Debt.

5.      The Human Resource Factor

  • The commitment and experience of a staff member can never be ignored for a successful business venture.
  • The dependence of your business on your own skill and your future involvement period is yet another major factor.

(B) Identify the Potential Buyer

Among all these important factors, there is one that will play a big-time role in your profits. And that is the art of identifying the likely buyers. This will, in turn, make sure that you are selling your business for the best possible price.  The best thing would be to find a buyer who falls under the following circumstances.

  • The buyer might want to utilize your well-established customer base or any other aspect of your business for other operations.
  • Employee benefits that already existed in the newly acquired business venture are also passed on to employees in other operations handled by the buyer. For examples of such employee benefits refer to police benefits or forces benefits or fire service discounts.
  • One of your products might be good enough to fill the gap in his / her product range.
  • Buyers may be interested in accessing the skills and manpower that you have already set upon.
  • The buyer may belong to an overseas business venture and might want to expand or establish his business territory in your country.

As the seller of your business, you should be in a position to judge the interest level and the affordability of your buyers.

Generally, buyers who belong to any of the above categories are potentially good ones. As Thomas Watson Sr., the former president of IBM rightly pointed out, “To be successful you have to have your heart in your business, and your business in your heart”.

Photo by Unseen Studio on Unsplash

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