What is my business really worth, and when does that value come to me?

Of course, there are a number of possible responses, some quite complicated. I like the simple answer: take the perspective of an investor who is sophisticated and looking for a business interest to purchase. If you were that person, knowing what you know about your business interest, would you buy it? If not, why not? How much would you pay? Why not more? What can be done to correct the problems that prevent your business interest from being marketable and worth more?

If you try to sell your business interest to a sophisticated buyer, that buyer will conduct a diligence investigation. Ideally, your business should be managed so that the requests on a diligence checklist can be met. Practically, undergoing a diligence review is stressful and time-consuming – not something undertaken without appropriate consideration of the effort involved. You can, however, as one who knows the business well, take the buyer's perspective and ask, if I would not buy this business, why not? Then, as a matter of good ownership and management, deal with that problem. Much of the time, that which will make your business marketable, will also be good management. “Would I buy it? If not, why not? For how much? Why not more?” Those questions are good ways to create meaningful planning.

A very good thing to do is to review a diligence checklist. Please click to access a PDF presenting a diligence checklist for the sale of a business.