If you’re a business seller, you must be very careful to check and test yourself on the value you’re asking for your business.
This is because sellers invariably look at their businesses through rose-coloured glasses – they simply don’t see the same risks that a buyer sees.
I tell sellers to try and put yourself in the shoes of a purchaser and ask: “If I was buying this business tomorrow and going to spend the next 20 years building it up, would I pay that price for the business, and why would I pay it?”
The reality is the business is worth what the market is prepared to pay, not what you think it’s worth, or what you need to realise from the sale to pay off outstanding obligations, or meet your retirement goals, etc.
Before you put your own a price on your business get some good, independent advice on its value.
Now if the valuation comes back at less than you ‘need’, that doesn’t mean you just wring your hands and reduce the price.
If you desperately need to get that money for it, maybe a sale right now is not the best option for you. Maybe you should look at other options to enhance and secure that value.
That could involve going back to the independent valuation report to see what was identified as detracting from the business’s value and working on those things.
Invest some time, make the changes suggested, and see if you can get the business to a point where it does deliver a value that meets your goals.
The JPAbusiness team offers a range of business valuation services. Contact us on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.
