Originally written by jamesjohnson on Small Business
When looking to buy or sell a business its value will be more than just the assets it holds. One of more intangible assets to value is goodwill – the magic sauce that makes one business attract a higher valuation than another that may appear to be similar.
Goodwill is the value that someone is prepared to pay for a business above and beyond the value of its assets. That will include the strength of a business’s brand, customer databases and those aspects of a business that add value to a buyer.
For most businesses, the value of goodwill is tied into its current and future earnings – what do the future profits of the business look like and can that profitability be increased – sometimes called “super profits”.
How to value the goodwill
In calculating goodwill, your accountant would start with the profit and loss accounts of the business, typically for the last three years. Some adjustments might be necessary to arrive at the profits for the goodwill calculation, sometimes called the average maintainable earnings.
The most usual adjustment is for payments to the owner or manager over and above a reasonable salary for the work they do.
Once
Tag Archive for Selling a Business
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Is Now the Time to Sell Your Business?
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4 Principles to Sell Your Business From Steve Little, the Mergers and Acquisitions Master Who Always Gets More
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This Is the Most Important Thing to Consider When Selling Your Business. (Hint: It's Not the Price.)
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How to sell your small business without a broker – Small Business guide
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
When you should avoid using a broker
Because business brokers charge a sizeable commission for selling your business, using a broker is not always necessary if you want to sell your small business.
And brokers can have hundreds of other clients, with often only a small number of staff to handle all enquiries. Anecdotally, 96 per cent of businesses listed with brokers never sell.
In the end, nobody is going to love your small business as much as yourself, so why not handle your sale yourself?
Being able to respond to background checks and due diligence queries directly is another plus, rather than having to wait days for your broker to forward questions from your buyer.
>See also: How to sell your small business through a broker
Because you do not have to factor in broker fees, you can offer you can find yourself selling your small business without a broker for more.
And because you are not tied into a broker, there is no penalty if you do change your mind and take your business off the market.
That said, Clinton Lee, a consultant who specialises in helping sell businesses, believes that all but the smallest businesses would benefit from
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7 of the most common myths around selling a business
by Jo Thornley • • 0 Comments
Originally written by Jo Thornley on Small Business
For many entrepreneurs, selling a business is a major decision. Given that many sell a business just once, it can be hard for even experienced businesspeople to understand the business sales arena and its established norms. Myths about selling a business, perhaps based on the evidence of one isolated transaction, are often voiced as general truths.
Make sure you don’t walk into traps by learning these seven common business sale myths.
1. I know the type of buyer I’m looking for
This could be ‘a clone of me’, a major player in your field, or someone with a large wallet and a string of companies. But why restrict your options? Someone else with good credentials, sound finances and new plans may be just the shot in the arm your business needs to move to the next level.
More generally, it can be reassuring to everyone if a change is largely cosmetic and it’s almost ‘business as usual’. But if maintaining your legacy and securing staff futures are your priorities, you may have to settle for a lower price to get such guarantees. That can be tough if cash is your key consideration. Remember a seller paying top
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How to negotiate the best deal when selling a restaurant
by Jo Thornley • • 0 Comments
Originally written by Jo Thornley on Small Business
Selling a restaurant business for a reasonable figure might at first glance appear to be something of a gamble.
But just like the process of buying a restaurant, negotiating a deal becomes a lot easier if you put some time and effort into the preparation.
Put another way, there are a number of things you can anticipate (and thus be prepared for) before they arise. So, with that in mind, here are a few things you should think about well before any sale negotiation takes place.
Business valuation
A solid business valuation will form the cornerstone of any later negotiations you conduct with an interested buyer. After all, your negotiating strength will just melt away if a potential purchaser is able to undermine the logic and rationale upon which your estimate of the value of your business is based.
Having a clear understanding of the value of your business is very important when it comes to negotiating the terms of the sale. So, obtaining a professional valuation from a respected valuer should be your first priority. Not only will a professional familiar with the restaurant trade be more likely to produce a reliable valuation, your valuer should also
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4 questions you need to ask buyers when you’re selling your business
by Jo Thornley • • 0 Comments
Originally written by Jo Thornley on Small Business
After years of hard work, you will probably be on the lookout for the best buyer possible when you’re selling your business.
Spending time on preparing your business for sale is one way that you can do this; another way is to know what questions to ask interested parties.
It is usually the buyer that comes with the right kind of questions to ask. However, if you are prepared, you can have a list of questions yourself so that you can easily spot the serious buyer from the window shopper.
So, if you’re thinking of selling up, read these pointers of what to ask a potential buyer.
1. Why are you interested in buying?
Asking a direct question such as this one will help you to quickly understand the buyer’s intentions. For example, if you are running a marketing agency and they have years of marketing experience, they might be looking to go out on their own. Or, they could be hoping to acquire your business in order to expand their already existing agency.
In both these cases, however, they should be able to approach you with a considerable amount of information as to their plans for the business.
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Selling Your Cannabis Business? Here's What You Need to Know.
by John D. Wagner • • 0 Comments
When preparing to sell your business, it’s important to be realistic and understand how valuations are determined.
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Buying and selling an online business: what to be aware of
by Jo Thornley • • 0 Comments
Originally written by Jo Thornley on Small Business
Established principles of buying and selling a business still apply with an online company – for instance, the need to dig deep and do thorough research – yet there are some differences.
The lack of bricks and mortar, for example, may make the process a little cheaper, and you may not have any significant staff employment issues to consider. Nevertheless, on the buy side or the sell side it’s mostly a matter of identifying the core issues to consider.
Here’s a rundown of what you need to take into account when buying or selling an online business.
Buying a business
Traffic
The success of an online business is measured in traffic volumes, which roughly equate to high street footfall.
But there’s good and bad traffic. So, you and your team will need to do your own analysis and verify any historic traffic data you receive. In essence, you will want to work out what percentage of the traffic generates business income.
In addition, you will want to establish that business arrives from a healthy mix of sources. Until you have such information, you can’t value the business.
Growth
As with any business, you should be able to track the figures over time.