Only a buye r can truly value the business
When anyone wants to sell something it is natural to think that they need to put a price on it. But this may be the most straightforward mistake business owners can make. Rick Grantham, managing director of QuickBerry, says it’s important to remember that the value of a business lies in what a potential buyer believes they can do with it, not what it is already doing.
“Our experience is that when we ask for offers, the range between the highest and lowest can be as much as two and a half times,” says Grantham. “That proves that there is no such thing as a perfect valuation of a company.”
The reason for this is that the more potential a buyer sees, the more they may be willing to pay.
“The two worst places to get a good price are from someone with money but no skill in your area, or from one of your competitors,” Grantham says. “The former can only do as well as the current owner, so they can’t price in much better performance, while competitors are just buying market share.”
The best offers generally come from companies that see synergies in the acquisition.