Do you want to sell your company and are not exactly sure how to determine the right sales price? We’ll show you how to carry out a valuation when selling a sole proprietorship. In this way you will learn step by step what to consider and how such an amount is made up.

Since the price expectations of sellers and prospects often diverge widely, it is particularly important to calculate a well-founded and reasonably steadfast sale amount when selling. A correct evaluation when selling a sole proprietorship not only saves a lot of trouble during negotiations, but also lets both contractual partners go out of the sale fairly.

There are various ways in which the rating can be determined. In the following, we will therefore introduce you to the most common options in more detail.

Multiplication method for valuation when selling a sole proprietorship

In the multiplication process, one speaks more often of the company valuation using the EBIT multiplier. EBIT, which stands for “earnings before interest and taxes”, is used in this context with a multiplier that is based on the operating result before interest and taxes.

With this variant, the adjusted earnings of the company are multiplied by precisely this EBIT multiplier. Then you have to subtract the net debt from this result.

How high the final key figure is ultimately also depends on the respective industry to which the company belongs and the size of the company. The exact factor of the EBIT multiplier differs depending on the structure and area of activity.

Calculation of EBIT

If you’ve been wondering how to use EBIT as a basis for calculating the multiplication process, then this overview can help you. There are two ways to determine EBIT.

DIRECT EBITINDIRECT EBIT
 

Sales
+ other operating income
– cost of materials
– personnel expenses
– Depreciation
– other operational expenses
+ Income from financial investments

 

 

Annual surplus
+ Extraordinary effort
– Extraordinary income
+ Tax expense
– tax income
+ Interest expense
– Interest income

 

= EBIT= EBIT

 

Applicability of the multiplication method

However, you should by no means see the use of this procedure as a fixed result for determining a company value. The result of this calculation should therefore be viewed as a guideline for calculating a sales amount.
Precisely because branches are subject to fluctuations again and again and trends have a major influence on the area of activity of companies, an optimal sales price can also change constantly.
Nevertheless, this procedure has established itself as the main procedure in the area of small and medium-sized companies, especially thanks to its low complexity.

Further options for determining a company valuation

In addition to the multiplication method for valuation when selling a sole proprietorship, there are other variants to calculate a sale amount. Which measure should be used when, among other things, depends on the industry and the size of the company.

Simplified capitalized earnings method

The simplified capitalized earnings method is mainly used when tax offices calculate inheritance and gift taxes. The average operating result for the last three business periods is multiplied by a fixed capitalization factor. This has been at a value of 13.75 since 2016 and is set by the Federal Ministry of Finance.

Net asset value method

In the substance value method, the valuation, as the name suggests, is calculated on the basis of the company’s substance. The components of this substance are the market value of all company-owned goods, inventories, etc. minus the debts.
The process is more suitable for smaller businesses with expensive material assets, such as real estate or equipment.

Comparison value method

No special calculations are carried out with the comparison value method. Rather, it is based on comparative values customary in the industry and thus instructs an assessment for one’s own company. This method is particularly suitable for companies in whose industry sales are frequent and they can therefore fall back on a wide range of comparative values.

AWH procedure

The abbreviation AWH stands for working group of value-determining business consultants in the craft. This community has developed a calculation method especially for craft companies. This process is particularly interesting for small and medium-sized companies. In contrast to other calculation options, parameters such as the relationship between private and business assets as well as the owner’s influence on the success of the company also flow into the sales amount.

Since this procedure could meanwhile become established, it is also accepted by financial institutions as a calculation basis for the valuation when selling sole proprietorships.

Rating when selling a sole proprietorship on Projektify

We at Projektify can also help you with the evaluation. We offer you a lot more information when it comes to evaluating and selling your company. But also in other areas like that Corporate succession or the new legal conditions of the GDPR we offer our readers a wide range of relevant details.

As experts in the field of buying and selling web projects of all kinds, we have set up our free platform especially for this. Here you can easily and without obligation your Offer web project for sale . But as an interested buyer, you will also find something with us. Just click through our advertisements . There is sure to be the right web project for you too!

You also have the opportunity to get advice from a real expert on Projektify. Just use ours for this Service of advice for the sale of a company.

 


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