It is no great secret that sellers often aim high. The logic sellers use is simple, “I can always reduce my price.” While that is true, sellers do need to remember that if the asking price is initially too high, buyers won’t even take a serious look. In short, your selling price must be bound by reality and what the market will bear.
Pricing Does Matter
When an asking price is too high buyers will simply move on. But in the meantime, you may have lost a qualified buyer that would have been very interested at a more realistic asking price. Pricing isn’t a factor that should be played with, instead it should always be treated in a professional matter.
Instant Millionaire? Maybe and Maybe Not
Some sellers want to become instant millionaires and sell their business for top dollar. Sometimes this is warranted and sometimes the numbers don’t support lofty valuations. Every situation and every business is different. It pays to be realistic.
Studies have shown that there is usually about a 15% difference between what sellers want and what the market will bear. For example, when a business is over $1 million, sellers usually sell for 90% of their asking price. Smaller businesses, valued under a million, usually sell for about 85% of their initial asking price. (Now, that stated, it is important to keep in mind that only data on sold businesses factors into this statistic.)
Business Brokers Help Determine an Accurate and Realistic Valuation
A Certified Business Broker has considerably expertise when it comes time to calculate a reasonable asking price for a business. They know that it is essential that they come up with a price that is fair and can be substantiated. As a result, a Certified Business Brokers takes many diverse issues into consideration. There are about 15-20 factors that affect the value of a business. A few of the factors that Business Brokers consider are type of industry, location, competition, annual sales and profit variations, condition or age of equipment, years in business, long-term employees, if the business is financeable, just to name just a few.
Prospective Buyers Can’t Read Your Mind
An experienced Business Broker can help you determine the right value for your business and determining the right value is key. The last thing you want is to have a valuation that is far too high as you will immediately eliminate many prospective buyers. While you may know that you are willing to negotiate and perhaps even reduce your asking price substantially, prospective buyers do not know this fact and will perceive this as an unmotivated seller. A realistic and appropriate asking price is of paramount importance and a Business Broker can help guide you towards the best decision on what the market will bear.
Market Forces Have the Ultimate Say
In the end, it is the market, not the seller, that determines the ultimate value of a business. Buyers today are much more educated on the process and pricing of a business. A buyer can spend a short amount of time on the internet to quickly learn what a realistic value is for a business. If the asking price is out of line, the buyer will move on to the next business. A Certified Business Broker can help in analyzing your business and providing an opinion of value.