The secret to selling a business for top dollar
Finding the right buyer is often more important than your valuation.
(FSB) -- Dear FSB: Why do you write that small businesses often are valued at, say, five times earnings, while large corporations are valued at perhaps 15 times earnings? I'm contemplating selling my business, which is very profitable and has tremendous growth potential. - Johan Hedborg, Managing Director Faidon Design (faidon.com) Gothenburg, Sweden
Dear Johan: In general small businesses sell at lower multiples than big ones because they are riskier. "They usually have to work harder to get market share than big ones do," observes Jessica Canning, a senior manager at VentureOne (ventureone.com), a research firm in San Francisco.
Small firms tend to be more fragile, less diversified, and more prone to failure, she notes, and have fewer assets they can sell to recoup investors' losses. There are, of course, exceptions. Every company is ultimately worth whatever someone will pay for it, and we hope you get a rich price for yours.click here.