What is the right price for a business? A selling price can be determined in a number of ways. The correct price is the price acceptable to the market. Generally speaking a price is directly associated with the businesses performance. Normally the buyer is confident that with his input/expertise or involvement he will be able to improve on the present business results. The old saying of a new broom sweeps cleaner does in most instances apply, either with enthusiasm or for whatever reason. The fact of the matter is the business can only be priced on a realistic acceptable price in the market.

What is a realistic acceptable price a willing and capable buyer will be prepared to pay for a business to a willing and serious Seller?

Firstly be it a Franchise or other business have a set up cost. This cost includes the equipment or tools that are needed for the business to function on a day to day basis. The setup cost at the time of the valuation and the actual equipment in the business can be worlds apart.

Secondly stock is the business can be added and generally a price is determined without the stock on hand which is added on at the time of takeover. The value hereof is determined by stock take on the effective date.

Thirdly goodwill can play a part in the value of the business. This value is dependent on the name and reputation the business has build up over the time it has been in practise.

Fourthly a value can be calculated on a repayment or return on the actual monies invested in the business by the new owner.

Fifthly a value on franchised business is generally calculated on an Industry rule of thumb. This rule of thumb is a comparison with other similar businesses in the same industry with the same type of market and similar turnovers.

A number of factors that will differ from business to business can be at play and it is therefore important to get an expert opinion on the selling price. If the business is overpriced it will not sell.