Need Business Advice on Selling a Business...?
Okay, i own a salon. I want to sell it because the rent of the business is too high. It has been hard to sell the business over the years because there's not a lot of customer, but this summer im assuming it's going to be busy. i've been posting the cost $15,000 for the business. Should i raise the cost to $30000 since summer is approaching where there will be more customer coming in . I really want to sell this business, but i have put money out of my pocket for the last couple months so i want to take as much back as possible. So is it wise to raise the cost or keep it the same? Thanks
- 10 years agoFavorite Answer
"It has been hard to sell the business over the years because there has not been a lot of customers." What I believe you are saying is the business barely makes you a living, buyers recognize this, and aren't willing to purchase. Let me ask you a couple of questions:
1. Why would anyone pay money to earn an amount they can make without the headaches of business ownership?
2. What makes you think this Summer will be different?
My advice is If you are so certain Summer will be better, then hold onto the company, improve the cash flow, and make it more desirable for a buyer. In addition to earning a fair salary from the business's cash flow, a buyer will expect a return on their investment of 15-25% after debt service.Source(s): I prepare and market businesses for sale.
- 10 years ago
The basis for your valuation (and your asking price) should be based on yearly revenue. So the fact that you are coming up on the busy summer months is no reason to double your asking price. If it is worth paying $30,000 to own the business just for the summer time than your asking price is probably way too low - people get their hair done all year long.
Most small, owner-managed businesses will sell for around two times there annual “Owner’s Benefit”.
The equation for coming up with your Owner's Benefit is:
Annual Pretax Profit + Owner's Salary + Owner's Perks/Benefits + Interest + Depreciation.
This number will tell the buyer how much cash the business produces for it's owner on an annual basis.
The perks and benefits are any items you benefit from that the business provides for you, but are not part of your salary. If your company pays for your cell phone, car or contributes to your retirement account, they would be included here.
We have created a report that goes into the pricing process in much more detail, you can download it for free here:
Every business owner is in a slightly different position so there will never be one formula or calculation that will work for everybody. But if you read the material in our report I think you will be able to apply it to your situation to come up with an appropriate asking price for your business.Source(s): http://www.thebizseller.com/blog