It can be really difficult to see a business that you have built from the ground up objectively, but there is a crucial decision that you will need to make as a business owner that will need to made without emotion- pricing your business.
As business brokers, we see it all the time. A new business comes on the market and it is priced ridiculously high. It might be a great business, but most of the time a business that has a crazy price will get no traction on the market and will stay listed forever.
When a business first hits the market it can create a lot of action from buyers, but those buyers can be permanently driven away if the price is too high.
Why do people list their businesses too high?
Usually one of two things has happened:
1. They got some bad advice. There are great professionals like business brokers and business transaction accountants that can help a business owner price their business right. There are, on the other hand, lots of professionals who know little to nothing about the buying and selling of businesses who give terrible pricing advice. This is usually not intentional, as they are using the knowledge they have to put a price tag on a business. The problem is that most of the time this price is way too high. Your regular CPA that you use for your tax returns or the business attorney that handled a labor dispute do not know enough about the business market to give you the right kind of advice. Seek the advice of a qualified business broker who will know how to price your business the right way- to sell.
2. They wouldn’t listen. Even though you have put all of your blood, sweat and tears into your business, a buyer is only interested in numbers you can prove. Your business broker will help you use comparable businesses that have already sold, the numbers you have on the books and other pricing qualifiers to help you set your asking price realistically. Pricing only becomes an issue if you as the seller refuse to listen to the advice. A good broker will not let you demand any price you want, they will refuse the listing if you decide that it is your unrealistically high price or “the highway”. Be very wary of a broker who will let you list your business for whatever you demand- you will end up staying on the market indefinitely.
Are you a business seller who made the mistake of pricing your business too high? Have you asked for advice on setting the price but got an answer you didn’t agree with? Please feel free to leave us a question or comment here, and we will be happy to help you with finding the right price for your business.
Leave a Reply