How to sell your business. What influences a buyer's choice?
How to determine the value of a business
Anyone who doesn't think about capitalising resources in advance risks facing serious problems in the future. Will the value of the business grow? Will you be able to sell it? These questions are important to consider while it is still in its development stage.
Before looking for a buyer, you need to determine the real value of your business. To do this, use one of four options:
1. The cost method of evaluation is used if the business is not profitable and the owner wants to return the invested funds.
2. The income method is ideal for simple businesses without complex assets. Multiplying the average monthly net profit by 12 and adding to this amount the value of tangible assets, you will get the average value of the company on the market without taking into account the peculiarities of the business.
Anyone who doesn't think about capitalising resources in advance risks facing serious problems in the future. Will the value of the business grow? Will you be able to sell it? These questions are important to consider while it is still in its development stage.
Before looking for a buyer, you need to determine the real value of your business. To do this, use one of four options:
1. The cost method of evaluation is used if the business is not profitable and the owner wants to return the invested funds.
2. The income method is ideal for simple businesses without complex assets. Multiplying the average monthly net profit by 12 and adding to this amount the value of tangible assets, you will get the average value of the company on the market without taking into account the peculiarities of the business.
3. The comparative method speaks for itself. For valuation, you need to compare your business with similar ones, find similar offers on the market and put a close price.
4. The market method compares the business with recently sold similar companies. This method is often used to estimate the value of a business in dynamic industries where it is easy to find data on sales of similar companies.
Eifos Hub's analysts help to determine the exact value of a business, taking into account its profitability, the market situation and external factors that may affect business processes.
Key financial indicators: how to evaluate and present
In order to sell a business on favourable terms, it is important to present its financial indicators correctly. This will allow buyers to see the real value of the company and its potential in the market. Presentation of the company's financial indicators when selling a business is one of the key points that can significantly affect the amount of the upcoming transaction.
Investors primarily look at the P&L (profit and loss statement). Some evaluate companies relative to profit growth, some look at business turnover, some look at margin growth.
Any growth of a company needs to be compared to the growth rate of the market. Potential buyers need structured information about:
Don't forget about false competition, it can be the primary motivation and interest on the part of the buyer. This insight will allow you to more accurately strategise the sale.
4. The market method compares the business with recently sold similar companies. This method is often used to estimate the value of a business in dynamic industries where it is easy to find data on sales of similar companies.
Eifos Hub's analysts help to determine the exact value of a business, taking into account its profitability, the market situation and external factors that may affect business processes.
Key financial indicators: how to evaluate and present
In order to sell a business on favourable terms, it is important to present its financial indicators correctly. This will allow buyers to see the real value of the company and its potential in the market. Presentation of the company's financial indicators when selling a business is one of the key points that can significantly affect the amount of the upcoming transaction.
Investors primarily look at the P&L (profit and loss statement). Some evaluate companies relative to profit growth, some look at business turnover, some look at margin growth.
Any growth of a company needs to be compared to the growth rate of the market. Potential buyers need structured information about:
- the value of the company in the future
- the company's growth rate (note that it is ineffective to analyse the company's growth in isolation from market growth).
- revenues and expenses;
- tangible and intangible assets
- personnel information
- key business successes and unique advantage.
Don't forget about false competition, it can be the primary motivation and interest on the part of the buyer. This insight will allow you to more accurately strategise the sale.
The most common mistakes when selling a business are incorrect valuations and inflated figures. The buyer does not care how much effort and emotion you have invested in the company. He is only interested in how much money he can earn. Evaluate the future deal objectively, focusing on real financial indicators, not on personal feelings.
The sales proposal is adapted to each potential buyer. It is important to understand his motives. It is the buyer and his goals that will determine your actions in preparing the business for sale.
Where to start?
The sale of a business, even unprofitable, should take place on the most favourable terms. Thinking about the sale in the ‘first’ approximation, you need to:
1. Study and analyse the market. What is the percentage share of your business in this market today?
Get busy monitoring the markets and track their consolidation. Study reports and statistics in different industries. It is important to focus on growing markets and analysts' forecasts. Keep an eye on emerging niches. Pay attention to public deals - almost all information is publicly available.
2. Research and analyse the market for your business.
If you can't understand what's happening in the market, LLC "EIFOS HUB" will help you assess the demand for such an offer and analyse current trends.
The sales proposal is adapted to each potential buyer. It is important to understand his motives. It is the buyer and his goals that will determine your actions in preparing the business for sale.
Where to start?
The sale of a business, even unprofitable, should take place on the most favourable terms. Thinking about the sale in the ‘first’ approximation, you need to:
1. Study and analyse the market. What is the percentage share of your business in this market today?
Get busy monitoring the markets and track their consolidation. Study reports and statistics in different industries. It is important to focus on growing markets and analysts' forecasts. Keep an eye on emerging niches. Pay attention to public deals - almost all information is publicly available.
2. Research and analyse the market for your business.
If you can't understand what's happening in the market, LLC "EIFOS HUB" will help you assess the demand for such an offer and analyse current trends.
Core and non-core buyer
Who might be interested in buying your business? Competitors, investors, partners, company employees or unrelated individuals who are interested in a ready-made business.
A non-core buyer is a person/company that has no experience in your niche. Dealing with such a buyer can have many pitfalls.
A profile buyer most often knows the direction of activity of the company he is interested in, understands what funds he is willing to invest. A deal with such a buyer will bring multiple times more benefits to both parties.
Package of documents: what do I need to prepare?
Selling a business is a complex and multilevel process. The success of the transaction depends on careful preparation, professional approach and understanding of the buyer's needs.
LLC "EIFOS HUB" financial analysts will assess your business and help you prepare the necessary documents for the sale:
Who might be interested in buying your business? Competitors, investors, partners, company employees or unrelated individuals who are interested in a ready-made business.
A non-core buyer is a person/company that has no experience in your niche. Dealing with such a buyer can have many pitfalls.
A profile buyer most often knows the direction of activity of the company he is interested in, understands what funds he is willing to invest. A deal with such a buyer will bring multiple times more benefits to both parties.
Package of documents: what do I need to prepare?
Selling a business is a complex and multilevel process. The success of the transaction depends on careful preparation, professional approach and understanding of the buyer's needs.
LLC "EIFOS HUB" financial analysts will assess your business and help you prepare the necessary documents for the sale:
- Financial statements. Balance sheet, income statement, cash flow data for the last 3-5 years.
- List of assets and liabilities. Real estate, equipment, debts, contracts.
- Legal documentation. Licences, patents, leases, agreements with key partners.
- Business plan. Company development plan with profitability forecasts.
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