How to value your business

Understanding your business’s true worth is essential for making smart decisions—whether you’re planning to sell, expand, or attract investors.

Selling a business is complex. It takes a lot of time and effort and there’s a lot of, there’s a lot of bumps in the road along the way. And if you’ve never done it before, you may be in for a rude awakening and you’ll never know if you got the best outcome when you do it alone. That’s why we always recommend you surround yourself with the right people or hire a team of advisors.

There are quite a few common mistakes people make when selling a business.

One mistake we see entrepreneurs and business owners make, is assuming that the expertise they have in building their business in the industry somehow translates to an expertise in selling their business.

Other common mistakes people make is not giving themselves enough time to prepare for sale. Giving yourself enough time will allow you to focus on the things that matter the most – people, operations, supply lines, contracts and finances to name a few.

To maximise the sale of your business you need to set some goals and strategies. Ideally you would give your yourself a minimum of 12 months of planning to exit your business. Even after 12 months you need to ask yourself or your advisory team – Are we ready?

Once you or your accountant / advisory team feel your ready to sell your business, this is when you may choose to seek a business valuation. Ideally while you have been busy preparing to sell your business you would have seen an increase in bottom line revenue and profitability. The business preparation strategy should have removed all personal expenses from your EBITDA which will reflect in profit margin. This common mistake is often overlooked by business owners which will become obvious to an experienced business buyer performing their due diligence.

You may even consider performing a financial audit on your business. This will quantify the business earnings and prepare your business for interested buyers and investors often saving a lot of time and negotiation during the due diligence phase.