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FORTUNE Small Business:

How to value your business for a sale

Ask FSB helps a reader prepare to sell a piano school

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(FORTUNE Small Business) -- Dear FSB: How I can sell my piano school?

- Claire Alvanos, Queens Village, N.Y.

Dear Claire: In the eyes of the free market, a piano school - at least a profitable one - has the same rosy hue as any viable company that's for sale.

"It's a question of finding a person with an interest in that business," says Mel Lisiten, founder of New York business brokerage Lisiten Associates. "The rest of it is all the same. Business is business. Numbers are numbers. Bottom line is bottom line. It's quite simple."

The only caveat: if the owner is also the sole teacher, expect a difficult sell, said Lisiten. In such a case, the piano instructor's only real option would be to sell his "book of business," basically the client list, to another teacher. Consequently, the value of the "school" would be a fraction of what an actual company with employees would have been worth.

Those running larger operations can either hit the market themselves or use a business broker. The choice depends on several factors.

"Owners should try and sell the business themselves if they feel they have the time and knowledge to do so," said Peter Siegel, founder of the online business market site bizben.com and author of Businesses for Sale: How to Buy or Sell a Small Business.

On top of their normal day-to-day work, self-selling owners would need to take calls from potential buyers and show them the business, advertise the sale, and enlist an escrow company, lenders, attorneys for contracts and more. Siegel said that piano schools typically sell for a 1.8x to 2.3x multiple of their adjusted net income, which is the total amount of money made by the business.

The Internet has plenty of helpful resources. You can list your piano school at one of the many online business markets (Check out our article on "Fresh ways to find buyers"), such as bizbuysell.com or businessforsale.com.

Siegel details the 12 crucial steps to selling a business and valuing a small business for sale on the website of the Senior Corps of Retired Executives (SCORE). And this ASK FSB provides more information on selling your business for the highest price.

Those choosing the broker route can check out Ask FSBs for tips on how to find the best broker and how to sell a million dollar businessTo top of page

Do you have advice for how Claire can sell her piano school? Talk to us.

Selling your business? Click here: A new marketplace hopes to become a one-stop shop for entrepreneurs buying or selling a business.

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