It is important to establish an accurate sales price when considering the sale of your business.
• The Seller definitely does not want to under-price the business and give it away for free.
• An overpriced business will never sell. The Seller might choose to lower the price after a while, but prospective buyers get suspicious and believe something is wrong with the business, which means it doesn't sell at all.
The valuation of a business can be done by using a multitude of methods the most accurate is based on the financial achievement of the business. The value of a business is however an open argument that if you ask twenty different people to value your business you will receive twenty different answers but opinions or perceptions unfortunately will not do.
The valuation method we use calculates an average estimated value utilising 3 calculation methods and has proved to be within a 10% range of the selling price usually achieved.
1.) Extra Earning Potential [EEP] - Also known as the "Super Profits" valuation method
This method states that in exchange for the risk of being in one’s own business, a buyer should receive an extra amount over and above what he could earn if his money was placed in a bank and he worked for a salary.
2.) Return on Investment [ ROI ]This method sets the value based on the return an owner would expect, as an investor, for the risk of being in business after allowing for a manager’s salary.
3.) Payback Period - Also known as the "Magic Multiplier" valuation MethodThis method, sometimes referred to as the Magic Multiplier is bases on the period of months over which a buyer would expect to recoup his investment multiplied by the net profit.
Feel free to contact me directly for more information on our FREE listing options.... Jacques Griessel for the Greater Durban Area - 074 954 7798 (mobile) - send me an email
No comments:
Post a Comment