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Feature:
The Price is Right – Or Is It?
There is more to a business than how much money it makes. Your business’ worth—what you can get when you sell it—is important to your financial security.
Using your gut feeling to value your business is a good way to get a stomachache. Wise buyers, sellers and business brokers rely on an appraisal from a credible third party, so the buyer does not over-pay and the seller gets the maximum price.
WHAT ABOUT PRICING?
If you want to sell for maximum price, get a credible appraisal. It gives you an advantage when you negotiate with a buyer—you can show written support for the highest value.
A professional business valuation is the irrefutable remedy when a seller, broker or buyer disagrees on price.
There are two important principles of pricing you should know before you offer your company for sale: The value of the assets and the value of the anticipated stream of profit. Together they affect price.
Price is important, but not as important as the amount you net from the sale. There are numerous legitimate financial and tax minimization techniques. With proper use of these techniques, you can price your business “lower” than the price you really want.
A lower price attracts more buyers, yet you net as much as you could if you were to sell for a higher price.
Your appraiser tells you the maximum price you can get.
A street-smart seller advocate knows how to get the buyer to want to pay the highest price, by creating buyer competition and showing the business in its best light.
To protect your confidentiality and sell in the shortest time, also employ a seller advocate. When it comes to marketing your business, there are two types of seller advocates.
Business Broker. The best brokers demand that sellers pay them upfront for service that relates to pricing and preparing the business for sale. The broker collects the balance of his fee if your business sells. The commission is up to 12%.
Consultant. Good ones specialize in the transfer of privately held businesses. They employ a comprehensive, step-by-step program to prepare and guide you and your business, so you can sell it by-owner. Expect to pay the consultant’s fee whether or not your business sells. If you have a marketable business, the consultant’s fee should be a fraction of the commission you would pay a business broker.
The most crucial thing about selling a business is starting right.
You only have one chance to make a favorable first impression. If you do not have all the components in place before you meet buyers, you could blow your chance to sell.
Mark Watson is the owner of Atlanta Business Solutions LLC, a consulting firm that helps clients buy, start, improve, finance, value & sell small and midsize businesses. For more info, contact Mark at 770 992-1065 or www.PartnerOnCall.com/MarkWatson.
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