Sale price of a sole trader
It is not possible to put an objective value on a business when selling it. The price depends, among other things, on the business's potential, the buyer's ability to obtain a loan and the tax implications.
For you, the business probably represents much more than economic value. Therefore, it can be difficult to see what value the business has for an external buyer. The value is determined by various factors that must be weighed together in an overall assessment.
Potential
The value depends primarily on how you and the buyer view the business's development. In addition to the financial values in the accounts, factors such as business concept, products, market, organisation and premises must be assessed. It is also important to consider the outlook of the company and the industry, any global trends that may have an effect and how sustainable the business concept is.
Buyers
Different potential buyers often make different assessments of a business's resources and market potential.
Change of ownership
If the change of ownership process takes a long time or causes complications, the value of the business may be affected.
Tax
Valuation is often complicated by the need to consider the tax situation and avoid negative tax consequences as far as possible.
Funding
The value is greatly influenced by the buyer's financial situation and ability to obtain a loan. Banks often require a large amount of collateral and a significant deposit from the buyer. The bank is also interested in the tax and contractual arrangements involved in the purchase. For the bank, the valuation is an important part of the loan approval process.
Customers
Customers and suppliers can also play a role in financing a change of ownership, as they can provide additional credit or advances. In this way, short-term liquidity problems related to the change of ownership can be avoided.