Did you know that one of the reasons that a business for sale takes so long to get sold is because it’s priced too high?
Any owner would always want the business sold at the right price or even higher. Not to mention the need to give an allowance in cases that buyers would haggle, sellers tend to price their business really high. This is a common mistake in selling a business. Sellers need to keep in mind that people who are looking to buy your business have looked at other businesses for sale for several months. Keen buyers compare what’s good and what needs improvement to make sure they are weighing their options properly.
Though it’s best to give room for negotiation, one third of the price based on the market value is a remarkable difference.
If we are selling a business worth $650k and we price it at $850k to test it out in the market. The business sits on the market for months with minimal or no interest. They would think that you are not serious about selling the business and that’s why it’s overpriced.
You will lose the buyer’s interest and it’s going to sit there in the market for a long time and you will be forced to lower the price based on the actual market value. By then you have already wasted your time and money or a potential buyer. That’s how vital to effectively price the business right off the bat.
How would you know that your asking price is right?
Here are a few steps to help you:
- Work with a bookkeeper or accountant to get your financial statements in order and to show the business to its financial advantage
- Consider the value of the tangible assets to have a better evaluation of the business worth
- Prepare your owner’s cash flow or statement of seller’s discretionary earnings so that you can see the full earning capacity of your business
- When you have done your estimate, check also other recent listings of similar businesses for sale and compare their asking prices.
Then deliberate with your sales advisor and/or broker the pricing information you’ve gathered and see how your pricing estimate coincides with the prices of recent comparable-business sales.
Set the price right and the opportunity to sell your business is just around the corner!