For how a buyer actually builds the number, from verified profit to the multiple and the lender, read the article Is your business worth what your friend sold his for?
Transcript
Your business isn't worth what your buddy sold his for.
If you've already got a price in your head, it's worth asking where the price came from. There are three common places, and each one has a key problem.
Maybe your friend sold his business for a big number, but you don't know his margins, his terms, or how much of that price he got paid over time.
Maybe your CPA gave you a number. They know your taxes well, but unless they value businesses for a living, pricing a business for sale is a very different job.
Or maybe you found a rule of thumb online, like revenue times some multiple. The problem is buyers don't pay for revenue. They pay for profit they can verify.
So here's the truth. Your business is worth what a qualified buyer will pay and what a lender will finance. It starts with the profit you can prove, and then you apply a multiple that fits your size, your industry, and your trend. If your numbers didn't come from that, it's really just a guess.
So where did your number come from? Tell me in the comments.
Thinking about buying or selling a business? Talk with me about selling, or browse the video library.
