Entrepreneurs tend to have an unrealistic idea of how much their business is worth. In order to be a successful entrepreneur one needs to be idealistic and optimistic and believe that at any moment the business will grow to the moon. The truth is every business has a history of income and expenses and a story of what is happening now. Buyers don't, and won't pay, for pie in the sky. Buyers pay for assets and the bottom line.

So how does an entrepreneur price the business?

The fact is there often is a big difference between hou much you, the business owner WANTS for the business and what a new owner WILL pay for it. At the end of the day, a business is only worth what some one else will pay for it...so if you really want to sell learn this now. And, if you believe that you will be able to negotiate a price somewhere in the middle you are really fooling yourself as a serious buyer won't be interested in dealing with you in the first place.

So, where do you start? If you have a business with revenues in the millions you'll want to get a professional business valuation. Ask your accountant, CPA, lawyer or seek out a competent business broker and get an estimate for what it will cost you to learn the fair market value of your business. This valuation will take into account what other businesses in your niche are selling for and will be worth the time and money in the long run.

However, if you have a small business with revenues well under $1 million you may end up selling the business yourself -- to a competitor, to an employee, to an interested customer -- I've seen it all. In this case, you'll want to be able to have an idea about a fair price.

Tip 1 - Buyers of small businesses are often buying a job or career. By purchasing a small business, the new owner now has a new job. How much will a buyer pay for his/her new job? How much will the buyer need to make by the end of the first year, second year, third year to make it reasonable to want to buy the business?

For example, your business generates $500,000 in total(gross) revenues. However at the end of the year, you have $100,000 in net revenues (left over to put in your pocket) - how much would someone else pay to put $100,000 in their pocket at the end of a year?

These are the hard questions you must ask yourself to be realistic about pricing your business.

Tip 2 - Banks will almost never loan money to buyers of even established businesses. They consider the transfer of ownership like a new business event. Therefore, most times a small business sale requires the seller to take back paper (loan the money to the buyer). How tied to your business to you want to be after the sale? Is the buyer competent to operate the business and keep generating the amount of profits you have now? Is it worth it to you to sell the business for less in order to move on?

How to price your business to sell is never easy for the entrepreneur who has put everything they have into the startup and years of growth. Get a consultant to help you and be clear about your objectives for the sale. Selling your business isn't only about how much money you get -- it very often is about taking your life to the next chapter.