How much is my business worth?
As a valuer, the question “How much is my business worth?” takes up most of my time and thought process. The flippant and most common response from people is, “It is worth what someone is willing to pay for it!”. This is accurate, but not particularly helpful in assessing the value of your business.
Different types of business attract different types of buyers with a range of aspirations and access to finance. Owners run their businesses around their lives, which needs to be taken into account in determining how much their business is worth.
Some businesses rely on pedestrian footfall and prominent locations. This makes the difference between one street and another huge for some businesses. For example, retail businesses, pubs and restaurants etc.
Others rely heavily on the owner’s involvement or “goodwill”. So on exit, some of the value of the business will leave with the owner.
For the reasons above plus many more, the correct way to value your business is not a % of the turnover or sales. It does not reflect the profitability or the individual nature of your business. Even more importantly, it does not reflect the way potential buyers behave in assessing how much your business is worth.
The most accurate way to value a business within the retail and leisure sectors is using a multiplier of the adjusted net profit. This takes all costs and revenue that are personal to the current owner out of the equation. It also assesses the net profit of the business if run by an average competent operator.
To learn more about what goes on in the sales and valuation process go to: What We Do
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1 May 2019