What Goes with It? Assets and your Business Valuation
As we often talk about here on our website, the first step to selling your business is to have a solid business valuation, so you know what your business is worth before you start the process of selling it. Because of how important this is, we offer a free tool to help you value your business in seven steps. This course walks you through a spreadsheet that will make calculations for you, and that will, when you are done, give you a great idea of what your business is actually worth.
As a part of this process, the question often comes up: “What goes with my business when I sell it?” It’s a good question, and it does vary by industry and individual business, so here are some general things to think about as you look at the assets your business has.
How vital are the assets to the business?
There are two kinds of assets in a big-picture sense for every business. There are essential and non-essential assets. What you must determine before you sell is which assets are which. If the buyer does not come with some of their own equipment, essential assets must go with the business since it cannot operate without them.
But when it comes to non-essential assets like certain computers, cell phones, and other equipment that is desirable but optional on an operational side, you may be able to decide what to keep and what should go with the business itself. The next few sections of this article will help you make those decisions.
Are assets up to date?
You could sell a new buyer old trucks, computers, technology, or other items, but as part of the deal, they may not be as valuable. Also, the new buyer may want to update things. Having the latest technology and equipment is often more desirable to someone taking over a business.
That means you also could make more money selling those items in the open market than as part of your business deal. Of course, that means more work on your part too. The other alternative is that you can bring things up to date by purchasing newer items, increasing the value of your business. Just know that if you sell these as part of the business deal, you won’t be able to depreciate them on your taxes (depending on timing) and you may not get as much as you paid for them out of the deal.
Take a close look at the assets you have if they are older in order to decide if they should go with the business, or you should keep them.
What’s next for you?
What are you doing next? Are you retiring or moving on to another similar business, perhaps in a different area? If some of the assets you have will be useful to you going forward, you have to weigh if they actually belong to and go with the business you are selling, or if you are going to remove them from that business and take them with you to your next venture.
Admittedly, this is rare. Usually, when you are selling a business it is either due to retirement or that you are moving on to a new industry entirely. But if you are in this circumstance, you’ll have to weigh the value certain assets have to you against the value they add to the business.
What does the buyer have and want?
A more common circumstance is that you are selling to a buyer who is already in the industry or you are selling your smaller business to a larger company that has its own assets. They may not even be interested in purchasing the assets your business has as part of the deal.
The buyer you find may also want some of the assets you have, and not want some of the others. If you can be, it is best to be somewhat flexible about what assets go with your business as part of the deal until your buyer has a chance to make their own evaluation.
Even then, it is good to know what you have and what those things are worth. This may mean in addition or as part of your business valuation, you also need an asset valuation. Talk to your business broker, as they may also be a licensed asset evaluator or can refer you to one in your industry or area of expertise.
Don’t forget intangible assets in your business valuation
There are assets that, while you cannot hold them in your hands, are still valuable. These include trademarks, phone numbers, websites, blog content, articles, publicity, and more. Not only will your buyer want to see these during the due diligence and sales process, but each has its own value as well.
This is especially true of websites and phone numbers, the ways that your customers or clients contact you. This can include email addresses, hosting, and any number of other digital items, including ads and marketing campaigns.
Be sure the buyer understands the value of those things, and don’t forget to include them in your business valuation. Your business broker can also help you with this step.
Are you located in California, and do you need a professional business valuation, or do you have questions? Are you ready to sell your business, and are anxious to get the process started? We’d be happy to help here at Rogerson Business Services. Contact us today!