When you are looking to sell a business, there are many way to price that business, which your VR business intermediary can assist.
- Multiples of cash flow – Usually 1 to 3 times annual cash flow depending on the type and size of the business;
- Value of equipment and inventory – This includes one year’s cash flow;
- 3 to 12 monthly gross sales – Depending on the type of business;
- Book value of assets.
Many elements will affect the price of the business:
- If there’s an earn out,
- Non-compete clause,
- General attractiveness of the business,
- Future potential,
- How the business fits with the buyer’s strategic plan,
- Size of the business – Larger businesses bring a higher multiple,
- Rarity of the business,
- If a business is a service business that’s tied to the seller’s relationships with customers,
- Retail or other type of business with a skilled staff in place.
Your VR business intermediary will be able to show you which method to use per the type of business that you have as a business owner. With a database of comparable sales, your VR business intermediary will be able to show you what price you should for when you sell your business.