Most homeowners know the value of their home - most business owners do not even know the approximate value of their business.
A leading reason for failure to sell is business owner's over-estimation of value, based on emotional investment.
Buying a business is the second most crucial decision in your life
, and you have most likely saved for years, and toiled many long hours to get it going. When the time comes, for whatever reason, to sell, you will want maximum return for your life's work.
A business broker that does business valuations is a specialty professional. Valuing a business is different than valuing real estate. There are intangible factors that only a seasoned business transactor would know -
- Quality and loyalty of Clientele
- "Intangible" Assets
- Tax history
- Potential for Growth
- Financial Leverage
- Cash Flow and Net Income vs. Gross Sales
- Is business based on the dynamic performance of an individual?
- And Many More!
Common pitfalls avoided with a professional Business Valuation
A common mistake made by people who handle the sale of their own business is basing the value on a combination of real estate value and time and effort.
Though time and effort are important to the seller, only market value is a factor to a savvy buyer. Like every mother thinks her baby is the most beautiful thing ever, many business owners do the same with their babies!
Only a fool would consider an over-priced business - and they are a bad risk for financing!
Not Qualifying the Buyer
Not qualifying the buyer is like drilling for oil without first getting a geologist's survey findings.
Many an inexperienced seller, or new to the game broker, has invested weeks or months courting a buyer only to find out that he can't get the funding to close the deal.
Too conservative an amateur business valuation can make for a quick sale and a tragic loss of net value on sale. This is nearly always due to lack of professional business valuation factors - common knowledge to professional business valuators.
A Buyer's "Due Diligence"!
Lack of Knowledge of Local Regulations - traffic laws, all Licenses and Permits, zoning requirements, environmental concerns, etc. A savvy buyer will sort these out in advance and screen out problem packages in a New York second.
"Measure twice, cut once"
These should be packaged and ready for perusal before your business hits the market. If you are selling for these reasons - be prepared to make concessions.
is Ross Perot's mantra. It refers to the loss of resource when you make a bad cut on, and ruin, an expensive piece of wood. In which case, you have to buy a new piece of wood and start over.
Selling a business is much more critical. once you blow it - you blew it! Get a Professional Business Valuation before you even entertain the idea of selling your business.