Set the right price
It is not at all uncommon for a business owner to have an exaggerated opinion of the fair market value of their business. In most instances, the owner understandably has developed an emotional perspective. Setting the right price helps reduce the amount of time your business remains exposed on the market. This reduces the business risk during the marketing and sales process. While it is not possible to completely eliminate these risks, setting the right price is critically important. By making sure the business price and debt structure are compatible, the risk of default by the buyer is also reduced.
As a business Seller, working with a business appraiser can be very beneficial. When used properly, a valuation can be a powerful management decision making tool and an effective selling tool. In much the same way that your intermediary will pre-qualify prospective buyers, a valuation can effectively pre-qualify your business prior to exposing it to the market. A pre-marketing valuation offers several benefits to you and your intermediary as well as to the prospective buyer.
First and foremost, it can assist in establishing a realistic selling price for your business. The emotional component of the transaction can be reduced by a pre-marketing valuation, with your intermediary bringing a qualified business appraiser into the process as an unbiased advisor. A qualified business appraiser will approach your business from a purely objective point of view.
This allows both you and your intermediary to utilize your time more effectively. A valuation can limit unrealistic expectations by providing a "reality check" while avoiding unnecessary exposure on the market. From the perspective of the purchaser, third party valuations add credibility to the selling price.
In the absence of a valuation, a purchaser has no way of quantifying the selling price of a business in order to determine whether or not it is realistic. By seeing that the selling price is in line with recent sales of comparable businesses, the anxiety level of the purchaser is reduced. At the same time, the purchaser's confidence level in the negotiation process is enhanced, as is the likelihood of the transaction being financed by a third party and eventually consummated.
The net effect of utilizing a valuation as a marketing tool is a more efficient use of resources by all parties concerned, a lower level of subjectivity and often a shorter marketing process for your business. The cost of these decision-making tools generally range from $1,000 to $10,000. Business appraisers can adapt the valuation process to suit your particular needs. Most can prepare limited scope or summary valuation reports designed to be utilized specifically as marketing tools. These tools often fulfill the requirement of supporting the proposed transaction and allow for a value-added service at a fair price.
In today's competitive marketplace, it is imperative that business people utilize their resources as effectively as possible while avoiding costly mistakes. Business sellers, appraisers, lenders and intermediaries ultimately work toward a common goal, even if it is from slightly different perspectives.
Through years of experience we have refined an effective system of managing the sale process for you. From the day you retain us until the end of your employment contract you will be able to focus on your business, not learning how to sell it. We get businesses sold smoothly, quietly, and for the right price. Please contact us to learn more about your options confidentially.