Why Should A Business Owner Consider An Independent Business Valuation?
In today's advantageous market, many business owners still leave substantial money on the table when they sell their companies - most often because they do not truly have a handle on 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 them 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 the business.
Determining a reasonable selling price.
Many owners rely on general rules of thumb, casual advice from friends,
or other similarly unreliable sources. Values determined by general multiples
or rules of thumb may be too high or too low. Unless the business owner
goes through the valuation process, he just will not know. 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.
Fully understanding the value of the
business will assist during negotiation. 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 if allowed.
The benefits of a business valuation are as follows:
Preserves and justifies the selling price
of the business.
Avoid leaving substantial money on the
table when selling the business due to undervaluing.
Simplifies and eases negotiations in
the business sales process.
Gives business buyers confidence in the
business and the price/value of the business.
Satisfy the lender's lending parameters
and make it easier for business buyers to obtain financing when applying
for a business acquisition loan.
