Do you know what your business is worth? One of the most important steps in selling a business is pricing it correctly. There are several ways to determine what another party would be willing to pay for your business; a formal business valuation is one option. Alternatively, many businesses can be properly priced with a Broker Opinion of Value.
Ultimately, the right approach will depend on the size and complexity of the business, the type of business, and the intended buyers of the business (i.e. individual investor vs. synergistic buyer).
What is your business worth?
The impact of improperly pricing a business can manifest a number of ways and at different points in the transaction.
- Since about 90% of private businesses on the market don’t sell, many sellers obviously don’t know how to be successful at it. We do! We at Sunbelt Quad Cities have represented hundreds of business sellers over the past twelve years. See our sales here: Sold Businesses.
- By engaging us you can be assured of proven professional processes and resources to help you be successful the first time.
- Number one in our process is to estimate the business value. We have proprietary valuation software to do a most probable selling price (MPSP) and/or utilize a national professional business valuation firm as needed.
Our experience shows that many business owners attempting to sell without the services of a high quality professionally trained broker often have unrealistic expectations about his/her business, and soon become frustrated with the lack of viable inquiries s/he receives and if they do get inquiries they don’t know how to handle the process such as, when to disseminate information and how to protect business confidentiality. Other considerations:
- A business broker without industry training and certifications may price the business wrong – too high, and it won’t attract buyers – too low, and the seller isn’t realizing maximum value.
- A readied buyer and seller may both become frustrated when lending institutions come back and refuse to write the loan based upon minimum ratio standards. Valuing the business right makes financing viable.
- Setting a proper value is the first step and if you miss the first step you are likely due for disappointment because the other steps won’t be forthcoming.
- Again, to assure a successful sale you need to start with a business valuation (many seasoned buyers employ substantially the same valuation methodologies, so you will already know what they expect to pay) and then employ a seasoned professional broker to guide the whole process while you run your business as normal.
- Your employees and customers shouldn’t know your business has been sold until right before closing. Your broker will work with both the buyer and seller, and the accountants, lawyers and brokers, from the offer through negotiations, financing, due diligence and closing. Your chances for a sale are then many, many times more likely.
- Statistically your odds increase from around a 10% chance of success to as much as a 65% – 80% chance depending upon the industry, category and business viability of the seller. Of course some people always beat the odds, but is it worth the time?