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Thursday, November 26, 2009

What is your business worth?

Do you ever wonder what your business is worth? If you plan to sell it, you need to know its value, or you might just want to know for tax purposes. Setting an accurate value is no easy task.

It may be relatively simple to determine the value of some parts of your business such as land, buildings, vehicles or inventory, all of which are referred to as tangible assets. Those items could perhaps be compared to other, similar, items to give you an idea of what they are worth. However it may be much more difficult to value other assets. You will need to assign a value to less concrete items (known as intangible assets) like patented technology, goodwill, copyrights, licensing or franchise agreements, trade secrets and customer lists. You can't simply compare yours to others because yours are unique.

Other considerations are whether your business is located in a small or large market, and whether there is potential for growth in that market.

How do you put a value on these things?

Most business owners over-value their businesses and are disappointed in the price they can get for it at sale, because they over-estimate the value of key clients. They forget that once they are gone from the business, the key clients may not feel the same loyalty to the new owners.

For a detailed discussion about what goes into the valuation of a business, how and where to find a business valuator, ideas for maximizing the price of your business and some tips for finding buyers, check out my new book called "Succession Planning Kit for Canadian Business". In the book I talk about selling a business to family members, management/key employees and independent purchasers. At the top of this blog there is a link for you to buy the book online.

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