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Timing the sale of a small business to ensue best price

| Oct 15, 2020 | Uncategorized |

Owning and operating a small business is a dream for many residents in Pennsylvania. However, there are some events during the life of a business where it may be more practical or lucrative to sell the business. Thus, it is important for small business owners to understand when it is best to sell their business and how to move forward with the process.

When to sell a small business

There are various reasons to sell a business. Some of them could be for monetary gains or they could be very personal to the seller. However, no matter the true desire for selling a small business, there are some considerations to address when assessing the timing of the sale. Ideally, one sells a business when the economy is dong well, they had a positive financial year and the forecast for the business is positive. When all of these conditions exist at the same time, a business owner can almost be rest assured that they will be able to sell their business for the best price possible.

Valuing your business

If it is determined that the time is right to sell a business, then the next step is to determine the value of the business so one can rest assured that they got the best price possible. There are three methods one could take when establishing this. The first is the marker-based approach. This entails looking at other business in the same or similar industry that have been sold. The sale prices should be averaged to give one an idea of the value of their business; however, this is not always the best approach as it does not always give an accurate price point due to the changes the market experiences.

The second is the asset-based approach. This method calculates the value of the business by look at the assets of the business, basing the price of the business on their fair market value. The drawback of this approach is the fact that it does not quantify other valuable intangible assets. The final method is the income-based approach, which values the company based on the money the business has generated while also taking into account income and debts owed.

Make an informed decision

Deciding to sell a business is no small feat. It is a process that requires planning and the right timing, so it should not be taken lightly or completed quickly. Looking at the logistics is only part of the process, as legal issues could arise. Thus, it is important to consider these business law issues and how best to move forward and resolve them.

 

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