Many business sellers want to know how to sell a company. This process is not easy. It takes many years of experience to navigate. First, there is the business valuation. Next are the service providers, including the lawyers, certified public accountants, and consultants. Are of these aspects must be satisfied before a sale can happen. Companies are generally worth two to four times what their cash flow to the owner is. This cash flow can be littered with personal items and is sometimes called seller’s discretionary earnings. This is usually EBITDA, plus what the seller pays themselves, plus other one-time expenses or personal items that are run through the business. Consult your local business broker in Austin, TX for more information.
Many companies typically fetch two to three times what the owner pays themselves. So, if a business generated one hundred thousand in pre-tax, pre-debt earnings, the business would typically sell for two to three hundred thousand dollars. This isn’t always the case. In extraordinary circumstances, a business might sell for only one times earnings or even four times earnings. There could be instances where the owner is a sole proprietor and has no employees. This business might typically only fetch one to two times earnings. On the other hand, a business where the owner does not work in the business but the business is growing extraordinarily fast, might have a shot at a four multiple. This would also depend on the absolute value of the earnings, meaning the level of earnings. Since there are so many factors that go into a business valuation, it is best to consult with a business broker to be sure. If you want to know how to sell a company, call CGK Business Sales for a free initial consultation.