The true value of a small business is found beyond its finances<\/b><\/p>\n
When trying to determine the value of small businesses, one of the most commonly asked questions that buyers have is:<\/span><\/p>\n However, it is equally important to look beyond financial data when you are determining the worth of small businesses. Often, these financial data can be inaccurate or inadequate because they exist mainly in order to minimize taxes and not to measure how financially successful the business is.<\/span><\/p>\n Beyond financial data, there are some basic factors that affect value and must be taken into account when you buy a small business:<\/b><\/p>\n <\/p>\n <\/p>\n A business in operation for at least 3-5 years is worth being recognized for its success, however great or small it may be. This means that the income has been enough that the owner can make some kind of life and, at the same time, can cover professional expenses, rent, sellers and employee payroll.<\/span><\/p>\n This means also that gross sales provided enough cash flow to maintain smooth business operations. Sales affect value to a great degree. This is due to the fact that the real bottom line of profit (Seller’s Discretionary Earnings or SDE) is drawn from the first line of profit (gross sales).<\/span><\/p>\n For a small business that has been in operation for at least three years and is earning less than a million euros in gross sales, a general rule is that the profit of the owner (SDE) should be somewhere between 10 and 20 percent of gross sales. As soon as a business starts making more than a million in gross sales, the profit of the owner (SDE) should be reduced to 10 percent or less.<\/span><\/p>\n <\/p>\n <\/p>\n A business is more valuable if it has the ability to grow after being sold. When evaluating a business, 30% of your attention should be focused on what the owner has already done and the other 70% should be concentrated on what you could do yourself with the business after purchasing it.<\/span><\/p>\n For example, if an entire business is based on the current owner because it depends to a large degree on one person, then it would be very difficult to expand.\u00a0 In order to expand this business, it may be necessary to do a lot of work in the beginning in order to create processes and systems that will ensure the smooth operation of the business in your absence.<\/span><\/p>\n Other important factors include:<\/span><\/p>\n <\/p>\n <\/p>\n Buying a business is just as much an emotional as it is a financial decision. If you do not like the industry in which the business is involved, or it does not match your lifestyle, then it will never be a suitable business for you, regardless of how successful it is.<\/span><\/p>\n Questions to ask yourself include:<\/span><\/p>\n <\/p>\n Dedicate some time to understanding the factors that affect the value of small businesses<\/b><\/p>\n <\/p>\n Buying a small business will change your life in unexpected ways, both in terms of your income as well as your daily life. For this reason, you need to be certain about what you are looking for before you make a purchase. As soon as you evaluate the basic factors and choose a potential business, you will inevitably need to visit it for further investigation. The next business you will visit might just be the right one for you.<\/span><\/p>\n If you have any questions, or need help and guidance, you can contact our skilled staff at <\/span>Business Interval.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":" The true value of a small business is found beyond its finances When trying to determine the value of small businesses, one of the most commonly asked questions that buyers have is: If I purchase this business, how much money can I make? However, it is equally important to look beyond financial data when you […]<\/p>\n","protected":false},"author":3,"featured_media":2777,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[76],"tags":[],"yoast_head":"\n\n
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