When you’re wanting to feather your nest and diversify your holdings, selling off different kinds of business assets can turn liquid assets into liquid ones. It’s not always possible to sell just part of a business or asset, so sellers often must be prepared to release control and full ownership to a buyer and move on.
Let’s learn about a few different kinds of business assets that can be sold to increase your nest egg for the future.
Selling a Private Business
Small businesses are hard to value and sell. Their price ranges for valuation multiples vary considerably too.
The type of industry that the business is based in, how complex it is to run and what requirements are present for working capital and further investment all play a part. The ability to fold the operation into a larger company and integrate quickly is a key factor for many buyers too.
The multiple for small businesses tends to be between 2-6 years’ worth of EBITDA (earnings before interest, taxes and depreciation charges). EBITDA is used for valuation purposes because it provides a clearer idea about future cashflow generation and makes it easier to compare to other deals on the table.
Auctioning Off Digital Assets
Digital assets such as web sites, mobile apps, Software-as-a-Service, T-shirt selling businesses, and more are now marketable online. Whilst sites like Flippa.com used to only auction off domain names and websites, they now also offer apps, SaaS, and a wealth of other digital assets both for auction and at fixed prices too.
Major players like EF International and Empire Flippers along with boutique brokers make online assets with mostly highly visible cashflow components a valuable item. They can be sold for their stream of anticipated income in much the same way as companies are on the stock market. And interest is growing from accredited investors keen to find high growth, non-correlated assets for investment purposes.
Selling an IFA Portfolio to Another Advisor
Independent financial advisors represent clients, providing investment advice. IFAs are based in the UK, but they do have their counterparts in the U.S., and elsewhere too.
Previously, it was difficult for a UK IFA to value the stream of income that’s expected from fees or commissions on previously sold investment products that their clients have been placed into. However, now there’s a facility where various IFA for sale packages can be found. This is a useful service for IFAs looking to retire or move into another industry, and ideal for IFAs wanting to expand their client list and assets under management too.
Just like with other types of assets where income is a significant component, the future stream of income is valued to reach a sale price. The IFA who takes over the representation benefits from the future income on fees and commissions. Some portfolios have low balances per client whereas others include high-net-worth individuals with substantial assets per client creating less management overhead.
Whatever business assets you own, it’s good to know that increasingly there are market makers providing new ways to turn liquid assets into liquid ones. This makes planning for the future less troublesome for existing business owners.