What price that sale
It may be trite but a business is only worth what someone will pay. It is in your hands to make your business attractive so an acquirer will pay good dollar to get ownership of your business. That means pushing ‘brand value’ into your operation. Brand value is much more than window dressing for sale as that will be debunked during due diligence.
Basis of Valuations
There some broad brush ways of assessing a business value but ultimately the negotiated price will mix all the various factors. Three basic approaches are asset based valuation, a market approach or an income approach such as a number of years purchase of cashflow and profit streams. There are as many pricing formulas and calculations as there are businesses for sale. A good, rounded commercial approach will serve you best.
All businesses should be worth the break-up net tangible asset value. In the 1970’s companies like Slater Walker made money be asset stripping companies, buying an enterprise for less than the constituent parts were worth. Watch for your opportunities during the current economic climate.
To be worth more than net assets the ‘Brand’ has a value. That may be reflected through the future trading, the ability of an acquirer to save cost or increase performance through synergy.
Consider your industry and situation
Service industries often have industry standard pricing formula eg. Contract cleaning companies may be worth 50-75% of turnover, Accountancy practices may be worth 100-133% of turnover. Newsagents , Post Offices or Fast Food retailers have location related prices based on supply and demand.
Intellectual Property based companies may consider the replacement cost of recreating the same knowledge and the strength of barriers to entry. The most difficult part is valuing the intangible assets such as the company’s reputation, the relationship with suppliers & customers, the value of goodwill, licences and patents.
Quoted companies have a stock market centric value per share. When a takeover or partial disposal is in the offing a premium for acquiring control of the ‘Brand’ is normal.
