In today’s advantageous market, many business owners do not receive the best value when they sell a business – most often because they do not truly know their company’s value. For that reason, the valuation process is a true asset to the business owner and a thorough, professionally prepared valuation will assist him or her in:
Helping identify the key value drivers, major strengths, and more importantly, the major weaknesses of a company, allowing the owner to solve both obvious and hidden problems prior to selling a business.
Determining a reasonable selling price. Many owners rely on casual advice from friends, advisers inexperienced in valuating businesses or other similarly unreliable sources. This can result in valuations that are either too high or too low. If the owner’s expectation of value is too high, it will prolong the selling process until a price concession is made. If the price is too low, money is left on the table. Unless the business owner goes through the valuation process, he or she just will not know if the business is priced at market value.
Fully understanding the value of the business will assist during negotiations. In this market, one can expect buyers to be sophisticated and experienced. They will conduct a rigorous analysis of the company, even if the seller has not. They will look at those factors and value drivers that the owner and his advisors should consider in valuing the company, and they will use that information against the seller in negotiations.