Scan’s Brokers can add a layer of confidentiality to the transaction. With professional and discreet office staff and all interested parties being required to sign a confidentiality agreement, Scan Business Brokers assures a high level of integrity when it comes to your businesses information.

This is one of the most important things that must be considered when calculating the sale price of a business is its future earning profitability. This is the main point in assessing the attractiveness of a business and it should be the basis on which the selling price is weighed or measured when considering fairness and acceptability. There are a number of methods for valuing a business, some of the most commonly used are:

Capitalization of Future Maintainable Earnings

One of the most widely used methods of valuing an existing business as it usually aligns reasonably well with buyer’s expectations. This method involves multiplying an estimate of future profits by the capitalization rate. This rate varies between industries and it is important to remember that the multiplier must be applied to the true profit which means that the owner’s wages must be deducted.

Industry Valuations

In some industries there are a sufficient number of business sales on an ongoing basis for a rule of thumb valuation to be applied to a business. Value is calculated by applying an industry multiplier to the gross sales or gross profit of the business.

Example: Supermarkets may sometimes be valued at say 5 weeks turnover. So if a supermarket had $20,000 sales per week, then the value would be about $100,000.

This method is accepted by industries where cost structures are commonly definable. Businesses which are typically valued using this method are:

Comparable Sales Method

Generally used in conjunction with one of the theoretical methods, this is a way of placing a value on a business based on the recent selling prices of similar businesses. The difficulty is that no two businesses are the same and for this reason, this method should only be used as a confirmation of the result of the initial theory based valuation.

Scan’s Brokers can help you establish the terms under which you will sell your business and discuss with you the strong points of your business so that these can be emphasized throughout the marketing and negotiation stages.

Once interest has been generated, our Brokers qualify each of the prospects to ensure confidentiality is maintained, sufficient capital is available and that they possess the necessary skills to carry on your business. It is only at this stage that they are provided with further information such as the Business Profile. All of this can happen while you continue to run your business without unnecessary interruptions.

This can include an investigation of the businesses financial records, staffing, customers, premises, outstanding legal matters, marketing methods, patents and trademarks, licenses and permits, insurances, stock and assets.

Unfortunately, this is a common stage within the selling process in which contracts collapse. The Due Diligence can sometimes uncover a fundamental flaw within the business, however, frustratingly, the issues are normally those that could’ve easily been dealt with prior to marketing the business.

Getting your business Sale Ready is a sure way to ensure your contract goes unconditional as quickly as possible. UPA, Scan’s parent company, can offer a Sale Ready solution tailored to your needs.

Both parties will commonly see a different value in the same business which is unquestionably where the negotiations begin. While both prices may be reasonable, it takes an experienced intermediary to bring the negotiations to a mutually beneficial meeting point.