As a professional adviser, Kingswood can provide you with a free initial evaluation followed by a full valuation using a range of methods to ensure its accuracy reflecting its true worth. However, the asking price can ultimately by set by the vendor.

A common mistake by many brokers is to over-value the business meaning you may struggle to sell it; it stays on the market for a long time and so compromises its saleability and thus value. Business owners always tend to believe their business is worth a lot more, as it’s difficult to be objective when emotions are involved. This is why you should always use the assistance of an advisor with expert qualifications (Chartered status). An advisor with experience will not only be able to offer a professional, detailed set of calculations, but an opinion on the market value by comparing with other transactions, particularly in your sector.

There are three fundamental approaches to measuring the worth of your company, as outlined below:

• Income approach – This approach involves determining the future economic benefits that will be generated by the business, which is then compared with the required rate of return. A number of different methods can be used to apply this denominator/numerator relationship, including excess cash flows, capitalised cash flows, and discounted cash flows and profitability multiples.

• Asset approach – This involves utilising one or more methods that are based on the valuation of the assets net of liabilities. To use this approach, you will begin with the balance sheet, after which you will need to restate liabilities and assets, where needed, to fair market value. Finally, identify any liabilities and assets that have not been recorded, and the effect they will have on the valuation.

• Market approach – Finally, there is the market approach, which involves using comparable analysis to decipher the entity’s valuation. There are a number of different valuation approaches for this method, but ultimately the market knowledge of the advisor is key here.

The right buyer has more to gain from buying your business and will pay more. Remember, a professional adviser understands the market and can target the right buyer for your business – including strategic purchasers. This valuation can be exceeded by up to 50%!