How to Value and Price Business Assets
When selling your business, valuing your businesses assets is very important. Potential buyers will want to know what these assets are, what they are worth, and if their value will increase the value of the business. One common mistake that business sellers make is not valuing all of the assets, or not valuing them accurately.
Begin by making a list of all of your business assets. These assets may include real estate, equipment, furnishings and fixtures, inventory, stocks, and money that is owed to the business, as well as intangible assets, such as trade secrets, client relationships, and trademarks. Once you have listed all of the assets, divide the list into two categories for assets that your business owns - free and clear - and assets that the business is still paying for.
For the tangible assets that the business owns free and clear, you need to determine the replacement costs for each item. If you have old equipment, you will need to know the replacement cost for previously owned equipment - this will give you a general idea of its current value. If you are selling a business, which includes real estate, you should have the property appraised by a professional.
There are many factors in determining the value of intangible assets, such as trade secrets, trademarks, patents, and client relationships. When valuing tangible assets, the older the asset, the less it may be worth. However for intangible assets, the older the trademark or trade secret, the more value it may have. You should consult with an accountant and other professionals to determine the value of intangible assets to ensure that you are placing the right value on them.
When valuating assets that the business is still paying for, you need to determine the amount you have paid on the principle. Since the buyer would either replace the equipment, or take over the payments, its real value is the equity you have in the equipment.
Once you have the business asset values, you should have your accountant and business broker look over it. Professional advice is invaluable when you are determining how to value business assets and how to price a business.
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