By Angela Dupont, ABC, CPCE, Dupont Events, Fort Worth, Texas

We can’t live forever. There will come a time when you have to leave your business for one reason or another. After all the hard work you’ve put into growing your business, brand, and reputation, it would be a shame to see it simply end when you hang up that “closed” sign for the last time. The logical step is to find the right owner and sell your business, your legacy.

Business valuation methods
The first step in selling your business is to determine what it’s worth. Although business valuation is an inexact science, there are numerous acceptable ways to place value on your business that depend on your industry, market size, and the current economic demands for your product or service.

One method is asset-based valuation, which adds the value of both tangible and intangible assets to come up with your total overall value. It’s simple enough, though it is commonly used for businesses that are failing and being liquidated, since it does not take into account future earnings and growth.

The earnings multiplier method takes into account historical growth and future expected earnings. This method finds the net present value of future expected earnings and then uses a multiplier to come up with the value. The multiplier can range from one times future earnings to over 10 times future earnings, depending on your market. If you are able to find a similar business in your market that has sold and used this method, you can get an idea for what multiplier value will be appropriate for your business.

Valuing the invaluable
Pulling together values for your tangible assets is simple enough. Office equipment, your emergency kit, printed goods—they all had a cost or have a replacement cost that you can estimate. It’s the intangibles that are tricky. What is your brand worth? Apple’s brand value in 2012 was estimated at nearly $183 billion, according to Brandz™ top 100 Most Valuable Global Brands of 2012 list (millwardbrown.com/brandz). How is brand equity determined for global organizations such as this, and can our small businesses glean some clue as to how to value our own brands? Brand equity is a value assigned by having a better-known brand name or logo than that of a similar product. Apple computers are going to sell better than an unknown computer brand that makes the exact same product, even if that product is superior.

The value is determined by profit margins, consumer recognition, and perception of the product(s) or company, changing market share, and other relevant information. Is your brand recognizable in your market? Do your vendors trust and enjoy working with your company? Although it could be due to personal relationships, it may also mean that your brand has value and a dollar amount should be tied to that in a potential sale.

There are numerous other intangible assets to consider. Among them are:
•    Your website and blog—The design and amount of traffic to the site are important components of your brand recognition.
•    Publicity—Are you often hit up for quotes in local magazines regarding weddings? Chances are that they find you because of your brand.
•    Reputation—You’ve built relationships with vendors, clients, and your community. Their trust in you and your business has value.
•    Future business—Are there clients that come back year after year, or for their next child’s wedding? The guarantee of future business can be calculated into a present value.
•    Methods of operation—Do you have special software or other methods you’ve developed to run your business effectively? When your successor steps in to take over and is able to do so seamlessly because of these methods, that has value as well.

Other facts that affect price
A potential buyer will look at the ease of transition as one factor in what your business is worth. They’ll also look at how anxious you are to sell. If you’re in a pinch, and they know it, don’t expect to get top dollar. What is the state of the wedding industry in your market? Is there enough business to go around or is competition tough? Do you have a strong list of repeat clients that can give your buyer peace of mind?

It’s not all about you
As entrepreneurs, we’ve put our hearts and souls into our businesses and our clients. I know I have. When you’ve decided to sell, valuing your business can become quite a sensitive subject. The bottom line in determining a selling price for your business is that it is only worth what someone else will pay for it. Detach yourself. Do the research. Keep excellent financial records. And hire an astounding accountant and lawyer.  By preparing now for an imminent sale, you can maximize your value to future buyers and ensure a lasting legacy.

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