OWNER 1. The Owner who has a realistic view on what his/her business might be worth, how much it might sell for. They may have spoken with their Accountant, a Business Broker, an M&A firm or a Consultant who specializes in selling businesses. Hopefully more than one.
Insights from friends who have sold businesses within your industry may have some similarities between their situations and yours. They could be a reliable source. But need to be verified.
Realists usually arrive at a value with about a 10 % margin of error.
OWNER 2. The other Owner who has no idea what their business might be worth and they have not done any of the work to find out. They have a figure in mind derived by simply pulling it out of the air. Or the selling price is based on a need for X amount of dollars. What they think might be needed for an easier retirement. What they think they deserve after decades of building the business. Or they just have the desire to sell for this magic number. A number that comes from nowhere tangible.
Typically the Owners who have manufactured a number tend to be way off. I speak to Owners all the time who are looking for a $6 million dollar payday. However, when you look at the mathematics of the business it's actually worth $600,000. Now that sounds like a big spread and it is. If you're going to dream, dream big.
The reality is, Owners with a reasonable understanding of what their business might be worth and those that do not are two very different Sellers. Owners living in a fantasy world believe a Buyer should pay a lot for the opportunity the business offers. News flash, if it has so much opportunity why haven't you done it yourself? If I'm doing the work to seize the opportunity why would I pay you more than the business is worth today?
Owners living in the real world are not frustrated by the selling process or disappointed by a lack of offers. The Selling process can be a rewarding and 'relatively' stress free experience. Or it could be the most painful, discouraging and debilitating experience of your life.
Up to you.
So the moral of the story with this weeks post is about being realistic. If you have no idea what your business might be worth give us a call. We'd be happy to help you work that number out.
Truth counts and hurts sometimes. We will give you a realistic view of what the business could possibly sell for. You might not like what we have to say or you might be thrilled by what we have to tell you. We won't know until we look at the numbers.
Which Owner are you? The realist, the dreamer or the one willing to hear the truth regardless of what it is.
Before you run off and try to sell your business for X amount of dollars, it might be smart to get an accurate accounting for what your business could actually sell for.
So click on one of the buttons below to DIY (do it yourself) or let us help you.