From Skeptic to Believer: Valuations. – From Steve Schaub
As a seller, do I really need a “Valuation”?
Before joining the team at Sunbelt, I was once a long-time, successful business owner. If I had been asked this question those many years ago when I began to consider selling, my answer would have been a hard, “NO.”
I had confidence in what I’d felt my business should sell for, but inevitably I would find that I really didn’t have a grasp on the reality of what it was actually worth to a worthy buyer. I’d end up leaving boatloads of money on the table by not getting a Broker’s Opinion of Value or certified appraisal. As someone who ran the business on my own terms for so long, I had gotten used to success through my own means and planning. Although I am happy with the way the new ownership is running my old business, that I’d built form the ground up, I wish I knew then what I know now.
This experience and others like it have taught me that in most cases, it is better to do it “The Right Way”, instead of only “My Way”; the two are not always the same. Some business owners already understand the importance of the valuation process and the small cost of producing the report, while others are reluctant or resistant to paying a professional to prepare a report that will not only help them see in detail why their business is worth what it is, but also is likely going to be required by potential buyers, lenders, etc.
In Real Estate sales, appraisals are evidence of your listing price; I think we all know that it’s just part of the process, especially if you want a bank to lend on the purchase. In parallel, a broker’s opinion of value or certified valuation can be the evidence from the eyes of a brokerage professional (in Sunbelt Business Advisor’s, Greater Bay area, that means 20 years of seeing businesses through the buying and selling process) who knows what the market looks like, what Lenders would approve, what parts of your business hold the most value and which parts need to be fixed, and what buyers would ultimately pay.
The first step is to understand the difference between opinions and appraisals and which one will provide the needed information at a reasonable price, and most importantly, be accepted by any lenders who may be involved in the purchase of your business. We can help you decide on what makes the most sense for you.
In May of 2020, businesses are continuing to be bought and sold but the rules are almost certainly going to be changing post Covid-19. Knowing where your business is strong, where and how it can improve, and finding out what your business is truly worth will make it much easier to market and find the right buyer to take over your legacy.