Only a buye r can truly value the busi­ness

Finweek English Edition - - MONEY -

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.

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