Buying a Business: How to Value a Small Business That's for Sale
Buying a business
How to value a small business for sale?
Buying an existing business can yield big rewards. The more market value a business has the better.
Discover how to value a small business that's for sale.
Starting a business from the ground up is a major undertaking without any guaranteed success after all that hard work. In fact, once opened, only about 20% of businesses survive their first year. This statistic is both staggering and disheartening.
Instead of swinging for the fences and shedding blood, sweat, and tears in the hopes of getting a business to profitability, you can ensure success and profitability by purchasing a business instead of starting one.
You might be wondering how to go about putting a dollar value on an active, profitable business.... There are certain ways you can go about that and make sure that you're investing your money in the right places.
Keep reading to learn how to value a small business that's for sale.
1. Assess the Business Market Value
If you want to know how to evaluate a business, one reliable method is to assess the business market value.
Business value is determined by the market itself. With this in mind, you can compare the type of business you want to buy with the same types of businesses that have already sold.
If a business you want to buy is way above the determined market value, then you might be getting ripped off. However, the market value isn't the only factor to consider.
2. Calculate Assets and Liabilities
Another way to get an accurate idea of how much a business is worth is by determining the difference between assets and liabilities. That number will be a reliable indicator of whether or not you should invest.
Remember that assets are a bunch of smaller chunks of a business that can add up to much more value than what might first meet the eye.
Liabilities, on the other hand, are debts that the small businesses still need to pay off, which takes away from value, of course. With that in mind, too many liabilities can be a red flag when thinking about buying a business.
Check out this video if you are looking to buy a website, eCommerce, an app or SaaS Company
3. Check the Income History
Yet another way to assess the value of a small business is by looking at its income history.
This is a great way to figure out whether your investment will be profitable at the get-go. You can also figure out if you're looking at a low-maintenance business or one that will need more work put into it.
By adding up the net profits of the business from the past and getting the average, you can have an idea of what to expect after you buy the business.
From there, you can use a purpose-driven model to grow that business even further if you're up to the task.
You Know How to Value a Small Business
Now that you know how to value a small business that's for sale, you can start thinking about taking your first steps towards finding an actual business to approach.
Whether you want to buy a business that's for sale or put your business on the market through a business broker, BizNexus can help you get matched.
To get started, sign up and set your acquisition preferences, and start getting matched with businesses for sale and business brokers who can help you. Try it at www.biznexus.com
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