Unlike established corporations, many entrepreneurs are having a hard time setting the price tag when selling their businesses. Inexperience in business valuation might force you to settle for less or overprice your business to a point where no one is willing to pay. Either way, it’s a loss.

There are different ways to approach this issue and there are several mathematical computations that you can use as guidelines. Several variables must be considered to get a decent pay. In some cases, personal reasons can have a big impact on your pricing. The important thing is to have a realistic price that you can use for negotiations. Here are the 3 big factors you need to consider in pricing your business:

How desperate are you to sell your business? We sell our business for different reasons aside from pure profits. It can be due to lack of capital to run the business, low profitability, or even personal reasons like more time for family or even severe sickness. This level of desperation dictates your willingness or stubbornness to settle for a price.

What’s the market outlook? A fast growing market segment will give you strong leverage to haggle for a better deal. It helps to understand the potential threats and opportunities so you can negotiate intelligently about the dynamics of your industry.

Market share and financial profitability. Are you a leader or a follower in your chosen niche? Your relative position in the market will give you the power to command better prices. But at the end of the day, the bottom line or net profit determines the attractiveness of your business. 90% market share is nothing if you’re operating at a loss.