Rogerson Kenny Business Accountants Melbourne

Pricing your Business for Sale

Setting the price

Setting the price for your business is one of the hardest tasks a business seller can do. Too high and it won't sell, too low and you throw away all that hard work undertaken over the years to build the business up. You need to talk with as many parties as possible when setting the price. Business brokers, your accountant, industry experts, valuers etc. Get as many opinions as you can. It's a hard task. As a seller you want reward for all the hard work and the buyer wants a steal. Find that middle ground and ask what is a fair price. Both the seller and buyer need to be happy!

Pricing methods

You can determine the selling price of your business in a number of ways...

• set the price at the same level as similar type businesses
• employ the services of an independent business valuer or broker to help determine the price
• use industry formulas that apply to working out the price (eg. for a caravan park, we would work out an adjusted net profit figure, which is done by adding back interest, depreciation, owners super & wages and any excess expenses like repairs and maintenance etc. From this figure, it is usually 3.5 to 5 times. So if adjusted Net profit was $250,000, you would be looking at a business worth $875,000 to $1,000,000)
• Simply set a figure you would like to achieve and see if there is anyone willing to pay for it
• Test the water

Remember - the business is only worth what someone is willing to pay. It doesn't matter how much time you have put into it or what you have done. They value is always in the buyers eyes!

Value of tangible and intangible business assets

A tangible asset are materials like equipment or furniture - assets that you can more or less touch. If there are of reasonable shape, you may be able to sell these or put a value on them to help build your selling price. Intangible assets are things like your business name, copyrights, trademarks, employees, customers, supplier contracts, customer contracts. These are harder to value, and unless there is hard evidence like contracts, trademarks etc, communicating the value to potential buyers will be difficult.

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