First Value your Business to Sell Your Business
By Allen Stockbridge JD CCIM
bXb Business Brokers
It’s your business after all. If it is time to sell, how much is it worth?
This is a hard question to answer, but knowing the value to the buyer prospects is essential to package and promote your business discreetly to qualified buyers.
Most Probable Selling Price That price for the assets intended for sale which represents the total consideration most likely to be established between a buyer and seller considering compulsion on the part of either buyer or seller, and potential financial, strategic or non-financial benefits to seller and probable buyer (International Business Brokers Association).
To expedite the Selling process, it is important to get a qualified, third-party valuation performed for the Seller. This will provide a realistic achievable price to be used by the business ownership for planning purposes and with the Business Broker to establish a reasonable asking price and expected achievable price and timeline for the eventual sale.
As importantly, the Valuation can be used by select Lenders in underwriting the deal for financing the Buyer. When the Lender reviews the Valuation and terms acceptable to the Business Owner, they can essentially pre-approve a loan that can be committed to for an otherwise qualified buyer, given a reasonable loan-to-value ratio.
A business that is ready to move forward with the selling process needs to get its ducks in a row and provide the appropriate and necessary information to the valuation expert. They take this information and format it in a way that can be compared to national norms for businesses of this type, size and quality.
The business ownership should prepare in advance all of these materials as outlined in our related Valuation Materials Checklist and give the evaluation professional a clean set of documents to expedite getting their evaluation done in a timely manner. You may request a copy of our Valuation Materials Checklist here.
A proper Valuation Report will run between 50 and 70 pages and organize your business information in a way that is rational and presentable to the business ownership and to approved third-parties such as lenders, and prospective purchasers. The cost for proper valuation report will range from $2000-$4500. This is an expense which is pre-paid by the business ownership so that they will ultimately save time in completing their sale. You may request a copy of our Generic Valuation Report here.
Another advantage of creating a valuation report is that it will identify opportunities to add value to the business and increase the net proceeds of sale. This can include everything from fundamental issues with the accounting history, employment policies, expense handling, existing financing, curbside appeal, contingent liabilities, and other factors with direct impact on value.
It’s best to address these opportunities to increase the value before the business is shared with prospective purchasers. This process can take from one month to 12 months or more to complete, but may be a desirable and important step for the business ownership to complete to optimize their net proceeds of sale.
Business ownership will need to determine the relationship between their desire to close soon and their desire to maximize or optimize the net proceeds of sale. This decision can be complex due to outside issues affecting the business ownership which may create time pressure to sell.
bXb Business Brokers maintains a list of qualified valuation professionals with references and samples that you can use to make your decision on who to hire and how much it will cost.
Because of the wide range of business types that are transacted in sales every year, selecting the right valuation professional is critical. They must understand the intricacies of your type of business and have the tools, resources, experiences, and relationships available to complete a proper report.
Please contact us by telephone or email to begin the discussion on selecting a valuation professional to suit your needs and budget. We regard this as the critical first step to selling your business and we want to help you achieve your ideal objectives. ã
Allen and Dick are resourceful, knowledgeable and honest."