You finally reached the point where you could go out on your own and become your own boss. You planned for years, started the business, and it immediately took off. Now you have someone who wants to buy your business, and you’ve decided you are willing to sell. When it comes to Business Valuation in Minnesota, however, you’ll find it isn’t as easy to value a young business as it is to value one that is well established. It’s just as easy to underestimate the value of the business as it is to overestimate it. Use one of these three methods of Business Valuation in Minnesota to determine how much to ask when someone shows interest.
You may choose to use the market approach method of Business Valuation in Minnesota, which is nothing more than estimating the earning potential of the company based on the expected demand in the marketplace. This requires you estimate the current size and future growth of the market as the higher these two are, the more the business will be worth. Stiff competition lowers the value while goodwill increases it. In fact, goodwill can increase the value of a business by millions of dollars. Take the time to compare similar businesses and see how much they are selling for also.
Financial analysts tend to use the income valuation method, which requires you project future cash flows before discounting them at a variable rate to determine the company value in today’s dollars. The discount rate tends to be steep for young companies, anywhere from 30 to 60 percent. Most new businesses avoid this method as it doesn’t tend to be useful.
The final method of Business Valuation in Minnesota, and the most preferred, is the asset valuation method. Here all assets are added up to determine a selling price. This includes physical assets such as office equipment and inventory, intellectual property such as patents and incorporation papers, and employees and principals, as this is where the money actually is. Don’t forget goodwill either when making this calculation. Add all together and use this figure as your asking price.
Turn to a professional if you find this task more than you can handle. Your goal is to get a fair price for the business. Sadly, many let their emotions become involved and blow the sale. Don’t let this happen to you. Seek outside help for great results.
