How to Price a Small Business for Sale

Pricing a business to sell requires looking at all aspects of your business and your own needs. The current economy--at the time of the sale--will figure largely into the price of your business. A down economy not only effects the amount of money your business is capable of making, but the amount of money potential buyers will have the ability to borrow for the purchase. Consider the reason you are selling when you set the price. You may be planning for the sale to finance your retirement or the purchase of a new business. The reason you are selling will be a factor when you set the price.

Things You'll Need

• Industry multiplier

Instructions

Asset Pricing

1. Add the value of all items you are selling together. This includes land, buildings, equipment and inventory.

2. Add your liabilities together. Liabilities are the amounts of money that you owe on the things you own.

3. Subtract your liabilities from your assets to calculate a rough estimate of the business's net worth.

Multiples of Revenue Pricing

1. Add all income for the current year.

2. Talk with a stockbroker, business broker or CPA to determine the industry multiplier for your business type. The industry multiplier accounts for the type of business you have, its location and the future of the industry.

3. Multiply your revenue times the industry multiplier to determine the selling price.

Discounted Cash Flow

1. Add your current-year earnings. This is your income less your expenses.

2. Look up the current long-term rate for Treasury bills.

3. Divide your earnings by the Treasury bill rate.

Tips & Warnings

• Business brokers will be able to price your business more accurately than you will in most circumstances. Add a percentage to the price of the business to cover the broker's commission if you want the buyer to pay the broker fees.

References

• Business.gov: How Much is My Business Worth?
• Entrepreneur: How Much is This Business Worth?