The Exit Strategy Starts With A Business Valuation
Determine the fair market value of your business.
Any one who has ever purchased a new home knows that an independent appraisal report had to be produced to complete the sale. A business is many times more complex. The key to having a viable valuation performed on a business is to have it performed by an independent third-party service.
Without a third-party report, a business owner should be prepared for heavy negotiations because it will be your opinion of value versus a buyer’s opinion.
Be wary of a business broker who prepares his own valuation report. A buyer will place no credibility in his opinion because he has a vested interest in obtaining a higher price than can be justified because it will increase his commission. A buyer will normally place no credibility in a value arrived at by the business owner’s accountant for the same reason.
There is a big difference in the quality of valuation reports that can be prepared. Many brokers rely on generic valuation software reports that are based on unproven theories. Is the report designed as a marketing tool, or is it something that has to be put in a drawer and not shown to a buyer? Was a true analysis of the business performed? Where factors such as industry trends, age of the business, client base, and other factors that will affect the price taken into consideration?