Tuesday, 19 June 2012

My business is a Gold Mine!

The statement “with a little sales and marketing, a new owner could make a fortune with my business” has been heard over and over by prospective buyers.

The question of course is: “Mr. Business Owner, why haven’t you made that effort?”

Buyers are not willing to pay the business owner for their future efforts and investment necessary to grow the business.  Business owners must take these steps themselves, which not only will increase their revenues and profits in the short term, but will greatly improve the value of their business. 

Every business owner wants to know, “What is my business worth?”

The short answer is, “Your business is only worth what someone is willing to pay you and what you’re willing to accept.”

The long answer is a little more complicated.  Start by establishing the business’ true profitability.  Buyers typically are comfortable with this method because, at the end of the day, although they are buying a company, what they really are buying is its cash flow.
With an understanding of a business’ actual cash flow, different multipliers can be applied to determine a fair market range of value for the business.  Multipliers vary depending upon the type of business, market share, customer base, and many many more factors.

Therefore, when an owner is considering selling they should turn to a good business broker for assistance.   By allowing a skilled business broker to do their job, owners will get help evaluating their business’ value and be able to concentrate on their job – making their business as profitable as possible.

Do you have small business questions you would like answered about this article or others?  Please visit www.VRWindsor.com or call 519-903-7807. 
William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.

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