How to set the right price for a company?

In order to set the right price for a company, it is necessary to manage the company in compliance with accounting, legal and managerial rules. Here are some explanations.

Evaluating the price of a company is one of the most important steps in order to be able to resell it under the best conditions. Indeed, if you ask for too high a price, you will not find a buyer. On the other hand, if the price is too low, you risk not breaking even and losing money. But then, how to estimate the price of a company?

Actoria experts have set up a 6-point strategy.

Pricing a business: our 6 expert tips

1. Update the company’s documents

The price of a business is also measured by the quality and completeness of its accounting, which must be impeccably kept, and its various legal documents. If you wish to put your business up for sale, review all the secretarial work and do not hesitate to have your balance sheet reviewed by an independent professional. An “orderly” business is always more attractive than a “messy” business.

2. Protecting intellectual property

If you develop products that require years of research, take the time to protect them and your trademarks. This must be done immediately, and not at the time of resale, otherwise you may face unpleasant surprises. Above all, you must avoid that your buyers discover that they are distributing a product copied by the competition.

3. Do not carry the success of the company alone

In other words, learn to delegate and entrust the management of your company to your various collaborators. The price of a company that relies solely on the skills of its founder is inevitably lower than that of a company that “runs” without him. For your customers, suppliers and partners, set up clear and identifiable processes, easy to reproduce after your departure.

4. Study the minimum value of the company

Before engaging in a transfer process, it is necessary to know the minimum value of your company. Call upon an independent and neutral expert. Avoid working with your accountant or trustee, who is inevitably subjective about the management and performance of the company.

5. Carry out an economic diagnosis

Beyond the financial expertise that evaluates the performance of a company at a given moment, an economic diagnosis establishes the forecasts and trends over the next 3 to 5 years. The simple fact of carrying out this exercise shows a desire for transparency that investors are sensitive to.

6. Bringing corpses out of the closet

As we have seen in the previous point, it is important to avoid unpleasant surprises for the buyers during the audit phase. Also, try to resolve your disputes before the operation and, if necessary, show your interlocutors the strategy you have put in place to deal with them quickly.

We understand that the sale of a company is anticipated years before the transaction and that respecting the above advice will allow you to set the right price for a company when the time comes. Do not hesitate to contact the experts of Actoria, who can guide and accompany you through these different steps.