The Difference Between Value & Price With Businesses For Sale

The Difference Between Value & Price With Businesses For Sale
on October 3, 2012 by in Blog

Value and PriceIf you’re looking to sell your business in Tucson or Southern Arizona, no doubt one of the foremost questions on your mind is how to price it for sale. You want to know what it’s worth. In fact, those are two different questions that are often confused.

Price is one thing. Value is something different.

When you come to Allen & Young Business Brokerage for advice about your listing, and end up listing it for sale with us, you should know that we will perform an appraisal of every business we list so that you will have a pretty clear idea about the range that a market-based selling price is likely to fall into. What the business is worth and what a buyer will pay for it are not the same thing, and can vary greatly depending on a number of factors, including, importantly, the individual buyer. As the old proverb goes, “one man’s trash is another man’s treasure.” We certainly don’t mean to suggest that anyone seller’s business is trash, rather in this case we mean that any given business for sale can be “worth” much more to one buyer than another.

How can that be the case? To begin with, a buyer who is familiar with your business may be willing to pay more for it because they have greater confidence in their ability to make a go of it. The location of your business could be incredibly convenient for one buyer, and less so for another.

You, the seller, can also make your business more valuable to some buyers, and thereby obtain a higher price, by being flexible with the structure of the deal itself. For example, by being willing to seller financing, you can attract a buyer who may be a great fit and wants to to buy a larger business, but would otherwise not have access to financing. You could also agree to offer an earn out, to reassure the buyer of your confidence that certain future targets will be met after the sale, and / or agree to stick around for a while and work for them to ensure the business keeps ticking along.

In short, if you want to get the maximum price for your business, then you need to be thinking about what is valuable about to each buyer on a case by case basis, and how you can alter the terms of the deal to maximize that price with each individual buyer. A well designed deal structure can benefit all parties – maximising price for the seller, and minimising risk for the purchaser.

Helping determine the optimal deal structure for your business on a buyer-by-buyer basis is one of the principal ways that your business broker can help you sell a business in Tucson
If you’d like more information on this subject, please Contact Us.

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