The value of a business is dependent on a number of things. For example:
Why do you want/ need to know?
If you are selling, why are you selling?
Who are you selling it to?
What are you selling?
Why do you want a valuation?
Many people will only need to value their business when they decide to sell up, some will need to know for the purposes of probate when someone dies.
Often a shareholder wants to sell part of or all their shareholding, and sometimes the owners have fallen out and need a valuation to help decide how much an exiting shareholder would get.
The value attached to a business may differ depending on the reason for the valuation. If a minority shareholding is being valued, that holding will have a smaller relative value to that attached to say a 51% shareholding because the minority shareholder will have less say over the day to day running of the business.
Why are you selling?
A business owner may consider selling all or part of the business because they are facing financial difficulty or cash flow problems. Others may wish to retire or move on to other ventures, or may have health issues. Some people may want to sell the business to employees or family members.
The timing of any transaction and the need of the vendor to sell may well lead to pressure on the selling price and therefore the amount which can be realised. Obviously if you have plenty of time and are not in any hurry to dispose of your business, you will be in a better negotiating position you will be in with a purchaser.
Who are you selling to?
If you are selling a business to a family member or a group of employees, you may feel that you want to sell the business at a lower figure than to a third party.
You may be under pressure to reduce the asking price from a purchaser because of their relative size, or conversely the purchaser may need your business to maintain their growth and ambitions and therefore will be prepared to pay a premium for that opportunity.
What are you selling?
The sale of a business can happen in many ways and can depend on the seller’s tax position as well as the buyer’s. For example, if you have a company which owns a property, the purchaser may prefer to buy the company rather than the property to minimise stamp duty costs. Stamp duty on the sale of shares is ½% as opposed to the 3, 4 or 5% that might otherwise be due on the purchase of a property.
In other circumstances, you may be selling the trade and assets of a business, part of a business or even just some of the assets owned by the business. How you structure the sale and the value attached to the various parts of the transaction may have a significant effect on your tax position.
For more information, or if you would prefer a free no obligation informal chat about the value of your business, please contact Melanie Richardson 01 825 763366 melanier@swindellsandgentry.co.uk
