Here are some questions to ask yourself when pricing a business and determining exactly what is for sale:
- What’s for sale and what’s not for sale? Does it include real estate? Is some equipment leased rather than owned? Is intellectual property licensed or owned?
- Where is the competitive advantage? Does the business have a certain niche, superior marketing, desirable location, unique product or product mix?
- Are there barriers to entry? Is it capital, low labor, market size, established relationships?
- Can the business grow? What’s needed to get to the next level?
- How dependent is the business on the owner/manager? Is there depth in the management team?
- Which assets are in use and productive which are not? Perhaps some assets should be sold off.
- What is proprietary? Consider trademarks, copyrights, patents, software, etc?
- What about employment and/or non-compete agreements? Are they in place with key employees?
- How much working capital is needed to run the business?
- How is the financial reporting? Is it accurate? Is it used and useful in managing the business?
These are important questions for sellers, buyers, and advisors to consider when setting and evaluating the price of a business for sale. The Pulliam Company can assist in clarifying the answers to these questions.