Going concern value
Posted by admin on 9 May, 2010 under Business advice | 
5 Comments to Read
If you are selling your business as a going concern you are selling the business as an on-going trading activity.
If you are selling your business as a going concern rather than selling the individual assets of that business, you will need to be able to demonstrate to potential buyers that they will be able to walk into your business and take over without any major problems from day-one.
In accounting terms, “going concern” refers to a company’s ability to continue functioning as a business entity into the foreseeable future. If a company is not considered a going concern then it is required to disclose this fact in its financial statements or if there are any factors that may put the company’s status as a going concern in doubt.
So a buyer of a business will be extremely interested in the “Going Concern Value” aspect of the business, which is usually higher than the individual assets of the business, so long as the business is profitable and has good cash flow.
Matt said,
Going Concern – now that is one business term I’ve learned today. Excellent business blog you got here! Very informative.
admin said,
Thank you for your positive comment on my business blog! Please come back and post further comments.
Line said,
To be success on business . First you must have knowledge for what you will do, after reading your blog i get some more experiences on this term .
Like what you said the most important thing that how you make the business going with good profit and good cash.
flow.
That is great.
Daniel Rose said,
Hi Russell,
This is a good primer article for small business owners. Another area small businesses seem to struggle with is the concept of goodwill, and how to calculate a fair value when it becomes time to sell. However even if they don’t comprehend the principles of goodwill and going concern, hopefully they at least have an exit strategy, far to many don’t!
J Drewberry said,
With very small businesses it is often difficult to determine whether the business is a going concern as the outgoing business owner is likely to be one of the largest assets (given knowledge, skills, experience etc). It adds another layer of complexity to valuation.
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