AN INDEPENDENT VALUATION SERVES AS A GUIDE, BUT IT’S DIFFERENT TO PRICE
The goal of an independent valuation is to determine the price at which a business would change hands in a free and fair market, where a deal is concluded by a motivated buyer and a motivated seller with all the facts about the business known to each party. The calculations that go into an independent valuation are useful, and it’s good to always know the current valuation of your business so you can use it as a long-term management metric. However, the actual price you get will depend on negotiation. The best possible position you, as a seller, can be in is one in which you don’t actually have to sell the business and probably don’t want to, yet have several competing parties bidding for your business. Most sales are concluded in less-than-ideal conditions – the business needs capital investment, the owners want to retire, someone is ill, etc. In most cases this lack of preparedness leads to a buyer’s market, but this doesn’t have to be the case – you just need to treat your business as an investment.