Who really sets the price for your business?
Whether you are planning to keep your business forever or sell it in the near future, understanding the value of your business and taking steps to create a more valuable business should always be a primary focus as a business owner.
Having purchased and sold my own business in a short period of time for a substantial gain, I understand the secrets to maximizing the value of a business. The steps to transforming your business into a desired business, that will sell at or above market pricing, are not difficult or ground breaking they do require focus, effort and time. Unfortunately, many business owners do not have the time to focus any efforts on maximizing the value of their business.
Here is what you need to understand:
1. 90% of Business Buyers are 1st time business owners.
2. A majority of Buyers have less than $200,000 of cash available to purchase your business.
3. Most business are sold with the Seller providing some financing to assist with the deal.
4. Banks often provide SBA backed financing to qualify Buyers.
5. Banks do not like to take risks.
So, who really sets the price for your business, and how can you influence that price. No matter what the Buyer offers you for your business, if the Buyer is going to use financing to make it happen, the contract price for your business means NOTHING until the bank tells the Buyer what they are willing to finance.
So, who does the bank use to determine the value of the business? Primarily, a Business Valuation Analyst. The broker gathers information from the Seller, provides it to the Bank who in turn shares it with the BVA. The BVA, using the information “provided by the seller” and the IRS (yes, at least three years of returns are required) determines the estimate of value.
Ok, so that sounds reasonable, right? Right? No, it is not reasonable because most business owners do not run their business to maximize the Selling price, they run the business to MAKE MONEY, in order to make money, taxable Net Income is usually seen as the enemy to profitability.
To make your business, BANK worthy, you must transform. Transformation will lead to a much higher sales price, a faster closing process, and many more Buyers looking at your business.
Contact me to learn more. And let me teach how to transform your business.