Business Valuations for Buyers
Importance of 3rd Party Valuation
In most business transfers, a business seller has pro-actively conducted a business valuation to ensure they are getting a fair, realistic price for their business. This is the smartest thing a business owner can do because it protects them and also the transaction.
Buyers too can benefit from using a 3rd Party Valuation for a firm they are considering purchasing.
Savvy buyers want to ensure they are acquiring a synergistic business that meets their objectives. If you are a buyer (individual, strategic, or financial/investment) and are considering a business purchase where you desire an alternate opinion of value conduct an independent third party business valuation Should the seller resist, then there should be cause for concern!
Another reason buyers should conduct a business valuation is to fulfill commercial lending requirements associated with banks and SBA loans. When an individual buyer seeks bank financing to purchase an existing business, some lenders will require a price and consequent loan justification, validated through a third party business appraisal. If real estate is involved, you can be assured an appraisal is required. In other instances, lenders may require a complete business valuation to justify loan proceeds.
The fees associated with a business valuation may be covered by the seller. Everything is negotiable. When a buyer pro-actively requires that a valuation be conducted, then the fees should be paid by the buyer and then adjusted for in the final purchase price; either evenly split or credited in full by the seller. In theory, it is the seller's responsibility to know the value of their business in order to preserve fairness to all parties involved in a transaction.
Buyers may wish a third party opinion as to the veracity of items that were financially recast as well. It is common for sellers to recast future benefit into historical performance. This is something the third party valuation can exploit. The veracity of the seller’s financials is of key concern to the independent valuation expert.
To learn more about getting a business valuation for a business you may wish to purchase, please contact us today or call us at 877-VALU-BIZ.