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Most business owners calculate the potential sale price of their business by using a multiple of profits. There are a number of other questions you should ask in addition to this though:
- How much do you actually need to live on?
- Is it going to be enough?
- Could the figure be more than you’ll ever need?
If it is the latter, you can emphasise other standards that the purchaser needs to meet rather than solely focusing on price.
There are countless considerations prior to sale, which is why cashflow modelling ahead of the event can be extremely useful. It can offer a clear concept of the level of income the proceeds of a sale might provide and the impact that any other capital expenditures or gifts you want to make might have on your long-term plan. That can then influence your understanding of exactly how much you will require from the sale to meet your personal needs. This should significantly enhance your negotiating ground as you’ll know your bottom line and you will be operating from an informed position.
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