Often times asset valuation is the best method for determining value in our industry. First, we must determine the value of all tangible property. Then (normally) we can add the last two years of net sales. There are, of course, other valuations methods that an accountant of broker can advise you on.
Here is the bad news; it is sometimes difficult to find someone willing to pay for your customer base. As impressive as your customer list may be, there is never a guarantee that those customers will come back next year. However, there are other steps that you can take to show the value of your business. The most important is a good profit and loss statement. This should usually be recorded monthly, any serious buyer will likely want to see the last two years of these statements.
To get a gauge on what other businesses of your size are listing for, you may find these web sites helpful.
A buyer may ask you to sign a non-compete agreement to assure them that you won’t open another business within a certain mile radius of them or within a certain time period. As a show of good faith the seller should normally agree to this.
Selling your business can be quite an involving process, and it is always a good idea to meet with your tax accountant and legal counsel before making a final decision.
If you are selling your business, follow these first steps to valuation and protect yourself!