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How do you price a business to sell?

How do you price a business to sell?

How each and every business is priced is different. Some of the major things that are taken into account when a business is valued include financial performance, in particular profitability, gross sales, the business industry, location, assets, intellectual property, real estate included, liabilities, revenue model, client list, cleanliness of financial records, existing staff, payroll, leases, inventory and barriers of entry. While there are a variety of other things to consider depending on the type of business, these are the core things to consider. Generally all of these items are taken into consideration and a multiple should be placed on owners discretionary cash flow, EBITDA, or gross sales to price a business correctly. Generally any real estate or assets with transparent value will be added to the business value itself.

As an example, restaurants may be priced anywhere between 1 to 5 times owner discretionary cash flow with the average generally in the 2-3 times. Some factors that effect that multiple price of the business include the stability of the profitability, the quality of the current assets, the remaining terms of the lease, whether the restaurant is a franchise, the location of the restaurant, whether the name and menu are included, existing debt, and goodwill.  Generally you can consult a business broker that specializes in your business type to get a up to date multiple on your industry and a free business valuation.

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Jacob Zimmerman, Business For Sale Exchange

Jacob Zimmerman is the founder of Business For Sale Exchange. He was introduced to the world of businesses for sale in 1995 when he worked on marketing flyers for a business broker working with a top California business brokerage. That business broker ultimately launched one of the largest specialty business brokerages in the nation and Jacob led digital and marketing strategy for the company, and spun off the largest marketplace for restaurant businesses for sale. Jacob has consulted with thousands of business brokers and business owners over the last 25 years and has assisted in marketing over 1,000 successful sales in California and marketed over 30,000 businesses for sale throughout the United States on behalf of brokers and owners.

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