The Importance to Buyers & Lenders
In 1st century BC, Publilus Syrus wrote: “Something is only worth what someone is willing to pay for it”. This holds true for all facets of life from consumer retail to mergers and acquisitions.
However, the role of a business appraiser is key for a business owner who intends to sell or exit their business and wants to establish a credible asking price for their business. If you price it too high, the business won’t sell. If you price it too low, you leave considerable money on the table. In most cases, a properly priced business will sell and all parties will walk away satisfied. Your goal should be to determine something close to “fair market value” – the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. This is precisely the role of an experienced and trusted business appraiser – presenting relevant facts to determine a company’s fair market value.
Determining the value of your business goes well beyond the book value of your tangible assets, especially for an established and healthy business. An expert appraiser will account for a range of factors and value drivers based on past and present business conditions and future forecasts including revenue, earnings and cash flow, intangible goodwill, asset values, market conditions and brand market share, geography and strategic synergies. The most common approaches to determining value for the sale of a healthy business would be a blended and weighted model of Income and Market-based valuation methods.
While business brokers and investment bankers will have a pulse on what the market can yield and can likely recommend a fair asking price, they are not positioned to prepare an independent third-party valuation. That’s where a trusted business appraiser can step in to help you and your business broker demonstrate credibility to potential buyers on how and why your asking price was established and the complex financial and market analyses that was conducted to help prepare the business for sale. You have invested years of your life creating, building, growing and optimizing your business. When it comes time to sell, you need be armed with a fair asking price based on proven principles, legitimate valuation models, extensive databases of market comps and expert opinion.