This is the second post in our Top 10 do's and don'ts of business selling blog series.
2. Don't – Head into the sale process without first seeking advice on what your business is REALLY worth
Do – Get a professional valuation
We all know that beauty is in the eye of the beholder. The first business I sold was two retail businesses that had been on the market for eight years.
The owners had worked for 30 years and built very successful businesses. They wanted to retire and had been marketing the businesses for sale for eight years and still hadn’t achieved a successful sale.
Why not, you may ask? Because the businesses were grossly overpriced.
They were grossly overpriced for two reasons:
- the owners had a perception of what the businesses were worth based on what they had invested in the businesses, the debt they wanted to retire, and other factors that were relevant in terms of moving them to retirement; and
- they had had some previous brokers and advisors give them a fairly ‘rosy’ view about the potential sale price in order to list their business.
The moral of the story is don’t wait eight years to find out what your business is worth.
The first task I had in selling my very first business was to sit down with the owners and have a rather forthright discussion along the lines of “look, you think the business is worth $1.5m – it’s actually worth $750,000 on a good day because of X, Y, Z….”
If I could give only one tip to business owners wanting to sell their business, it’s this: make sure you get professional advice and, ideally, a business valuation on the fair market value of your business prior to progressing to a sale process. Also make sure you get such advice from a credible advisor closely involved in buying and selling businesses.
You can agree to disagree on the value, but ultimately you need strong decision support before you invest time, effort and money in a sales process.
If you would like advice or support to sell your business, contact the experienced team at JPAbusiness for a confidential, obligation-free discussion.
From the JPAbusiness archives, refreshed and checked for accuracy November 2016.
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James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.