We’ve owned businesses, so we completely understand how much of an investment small business ownership is. Whether you started from scratch or purchased the business from someone else, you had to put a huge amount of capital up to start your life as an owner. You’ve then spent the rest of your time at the helm constantly reinvesting in your business to help it thrive and grow. If you go back and add up all of that financial investment – it’s huge.
When the time comes to part ways with this business you’ve invested in there can be an initial urge to put out a price tag that would recoup all of that invested money. The reality is that number is probably well beyond the realm of possibility.
The harsh truth of the small business market is your business is only really worth what someone else is willing to pay for it.
No buyer in their right mind would give you way more than your business is currently (and realistically) worth. Instead you need to price your business based on things like cash flow, your current financial statements, your inventory – you get the idea.
To be a successful seller, you need to be smart about your listing price. You want your listing price to generate interest, to be competitive with other businesses like yours that are currently for sale and to be in line with what businesses in your industry have actually sold for. The number you want and the number that makes sense might be very different, but you need to be willing to compromise if you ever hope of reaching a closing table.
A quick note here – be wary of a business broker who will let you demand to list the business for whatever you want. A great broker will help you decide on a number that makes sense based on your numbers and the current market. A terrible broker will take your crazy-priced business listing just to get the listing, knowing full well that the business will never sell at that price. The point of listing your business is to sell it, so price it to sell.
If your goal is selling, you also have to be prepared for the attitudes of buyers as they relate to the value of your business and the legitimacy of your listing price. Many new buyers don’t consider the vast investment you’ve made or the cash flow the business is currently generating – they incorrectly consider businesses as just four walls and the stuff inside, an asset sale. This misguided attitude means that many initial offers from buyers might seem shockingly low. The important thing to remember when you get a low offer is that it is merely a starting point for negotiations in much the same way your listing price isn’t the bottom number you would like to get out of your business. If your number is realistic and they are a serious buyer you can more than likely reach a middle ground that will make both camps happy.
The message here is to go into the process of selling your business with an open mind – and success will follow.
Are you thinking about selling and want to know what businesses like yours are currently selling for? Do you have questions about how the process works? Ask us! Leave any questions or comments here and we would be happy to help.
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