Every business is different. It's for this reason that the valuation process and methodology will vary accordingly.
Our experience has shown that buyers and sellers go through very different thought processes when considering value. For the seller, the expectation of value is mostly based on turnover. For the buyer, the motivation for purchasing may not be driven purely by financial calculation but by the impact it would make on their existing business or future strategic direction.
Having said that, it is also important to note that buyers will have quite diverse views when valuing a business. For example, a trade purchaser in a sector that is consolidating will often be prepared to pay a premium to grow market share. On the other hand, an investor will mostly look at the return on capital employed. Either way, it is important not to neglect the motivations of the buyer, and you should as far as possible be able to demonstrate the underlying potential of the business. This could help significantly in improving valuation.
Below are just some of the factors that need to be taken into consideration when asking for a realistic price:
- The length of time the business has been established
- Its past performance
- Its customer base
- Competition and market share
- A balance sheet of liabilities and assets
- The underlying potential of the business to the buyer
There are many more factors that we would be happy to discuss at our FREE, non-obligation consultation. To book your appointment at our office, please contact us. |
