Historic accounting is one of the most important factors in determining the current profitability of a business and establishing its sale price. Future earnings and potential risks also need to be analysed and considered, such as loss of customers. A business that relies on just a few customers may be considered as high risk and ultimately less valuable.
In order to prepare for the sale of your company, you will need to spend time improving its profitability and working on future earnings potential as this will go a long way to attract prospective buyers.
As the proposed sales window approaches, you need to review every facet of the business and address any problems that may occur during the sales process in order to minimise risk, otherwise these problems may devalue the business. These could be legal, accounting, tax or environmental issues so it’s worth taking the time to think about them carefully and address them thoroughly. No one will want to invest in a business that has outstanding tax enquiries or a pending employment tribunal, at least without a reduction in price. Carry out your own internal due diligence to see what a potential buyer might discover.
Valuing your business for sale isn’t just about weighing up your hard assets. Whilst these are easy to price, its trickier to assess the value of your employees, location, suppliers and customer lists. Consider implementing a business appraisal in order to effectively assess the overall value of the business. It’s also important to remember that a prospective buyer might place their own values on different aspects of the business, but generally their biggest priority is the business’s earnings and cash flow.
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