How to Price a Small Business for Sale
Small businesses fall into several different categories and industries. For this reason, there is not a basic selling price for a small business. Each small business placed on the market is evaluated to determine fair pricing based on numerous factors.
- Conduct a market analysis for small businesses in the geographical region in which your business is located. Real estate agents use this method to determine the market price for real property. A market analysis is an evaluation of listing prices for similar properties in the target area. The listing price is the sale price for the property.
- Evaluate the small business property assets. Assets are properties owned by the small business. Office buildings, products, and bank accounts make up these assets. Incoming earnings are assets as are any funds that are in savings accounts and stocks.
- Evaluate the yearly earnings of the small business. Determine whether earnings have increased or decreased in the last few years. This data determine projected earnings for potential buyers. Profitable small businesses possess more valuable stocks than failing small businesses.
- Evaluate the value of each stock for this small business. Stockholders receive a payout when a small business is sold. The amount of the payout is based individual stock value. Multiply this value by the number of stocks owned by the shareholder.
- Hire a commercial real estate appraiser to establish the full value of the small business. Provide the commercial real estate appraiser with the evaluations from steps two through four. The commercial real estate appraiser inspects the properties owned by the small business to determine the appraised value of the small business.