WHAT IS MY BUSINESS WORTH
Expert Guidance
This is one of my favourite topics. I often say to sellers when we go through this process that you can have 10 experienced business brokers look at the exact same information on the same business and potentially get several different assessments. This in part comes down to their previous experience with your industry, the current supply and demand for your business, the general economy and also how they chose to appraise or value your business. When a broker has to appraise your business there are so many things that should be taken into account.
One of the first steps is to have the accountant and/or broker normalise the financials. This is a process of assessing any adjustments to the profit and loss trading statement for the current and possibly prior financial years. Adjustments might be for example checking that market rent is the same as the rent expense, checking any and all owners have applied and paid themselves the correct market wages and superannuation (sometimes they pay extra superannuation contributions), assessing any personal or one off expenses etc
Other variables that may affect a business brokers appraisal is the value and quality of assets, the level of stock the business requires, the level of debtors (accounts receivable) the requirement for working capital, work in progress, deposits held, gift vouchers, staff entitlements and liabilities.
Other possible considerations might be how entrenched any owners are in the business, how systemized the business is, how the business wins new business and retains existing clients, the history of the business and its brand. There are so many areas of consideration and that is why you can easily get different opinions about what the business might be worth.
An experienced broker will not tell you what you want to hear. Sellers need to be treated with great respect and that includes the good the bad and the ugly. Pricing a business from our perspective often means we provide a price guide and list usually for the upper end of our guide and advise offers in the range is where we should have a chat and counter offer the buyer.
Over 75% of our sales are at full asking price. Why? We list businesses that represent value and opportunity for the buyer. We know (generally speaking) what return on investment principles and capital requirements are and as we often say start with the end in mind. This thought process means we are more likely to get buyers interested in your business and then have their accountant endorse the business and banks be able to or these days want to fund the buyer.
Any broker can list a business but selling one where both the seller and buyer are happy is an art!