News & Resources

Plan ahead for best business valuation

Jan 28, 2011 Karen Umpierre

If an entrepreneur is considering selling his or her business, a profit can be maximized by simply planning ahead and performing a business valuation, writes Mike Handelsman for Entrepreneur magazine. Those selling a business must be prepared for buyers to be incredibly knowledgeable. They will likely do their research before signing on the dotted line, Handelsman explains. Sellers should be ready with lots of information to prove that the business is worth the valuation and the asking price. Think of it as putting your best foot forward. Business owners should make sure their financial records are in order and keep a minimum of three years woth of documents, including expense records and tax returns. Any outstanding business problems should be resolved, such as short-term lease agreements, any outstanding legal issues and any physical elements that need a facelift. Cleaning up the distribution facility or re-decorating the interior can make a big difference in the first impression a buyer gets, says Handelsman. No matter what an entrepreneur sees as the value of his or her venture, the market will play a big role in the overall business valuation. In order for a business to sell, it must be priced appropriately compared to other similar businesses on the market. For prospective business owners, buying an existing firm is often less risky than starting from scratch, advises Entrepreneur.