Pricing your business correctly is critical for a successful sale. You will want to find the right balance between maximizing your take home earnings and pricing your business so buyers take you seriously. Obviously, you want to get as much money as you can for your business sale.
Speaking frankly, too many small business owners do not correctly price their businesses. We’ve seen this more times than we can count and it makes us sad every time we see it.
There are two main risks with pricing your business too high. First, your business will not sell. If buyers cannot justify your asking price, they are not going to engage with you. This is especially true with the spread is large. For example, if you’re trying to get $100K for a business that’s worth $30K, you won’t find a buyer. Second, if you price too high, you’ll eventually have to de-list, then re-list your business, usually with new marketing. This is a pain in the ass. It’s better to get pricing right on the first try.
The best way to sell your business is to start with a business valuation that helps you understand what your business is worth in the current market. Once you understand how to value your business, you have choices. You can list your business for sale at a price in line with the business valuation. If you are not happy with the valuation of your business, you can also spend some time changing your business so it can command a higher asking price.
The best way to earn a strong valuation for your business is to plan for a sale well before you are interested in selling. Understanding how your business might be valued early on prepares you for the future and gives you a realistic sense of what to aim for “someday” when it is time to sell.
As always, if you’re considering selling your business or want to understand how to value your business, talk to us. We aren’t shady brokers. We’ll prepare you with knowledge so you can plan your successful business exit.
