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What is my business worth?
What is my business worth?
In part one of a new series where we address the top questions we get asked by business owners, we take the most asked question of all: What is my business worth?
The short answer is: it is worth what the market is willing to pay for it!
The long answer is slightly more complicated, so let me take you through it.
Our philosophyIn our many years (30+) selling businesses we have lived by a key principle: never take a company to market with a price tag attached. This is one of the most expensive mistakes a seller can make, as it will put an upper limit on the offers you receive. Worse, potential acquirers use this number as a jumping off point for negotiations – downwards. Shareholders going to market with a price on their business rarely realise this price.
Our approach may seem unusual, and we often get asked a company’s price by prospective acquirers. Our answer is always: what is it worth to you? We encourage the potential buyer to consider the effect combining your unique strengths, capabilities and opportunities with theirs will have on the growth and profits of their company going forward. And we let them know that they are up against competing buyers.
Our process works because we look to identify stratigic buyers, to whom our clients business can offer something that will be sought after. Where the long term stratigic benifits to the acquisition represent real growth potential. An popportunity that an acquirer would be daft to pass up on.
A competitive environmentWe would typically speak to around 100 target acquirers just to sell one business. This usually results in around 20 highly interested parties, which qualifies down to around 5 that are willing to progress to offers.
At the latter stages of this competitive process acquirers know that they are bidding against other buyers. With the pressure on to submit their best offer for fear of missing out to someone else, we are able to negotiate upwards, rather than down.
Because of this, we can only ever tell you what your company is worth once you have accepted an offer. And we will never lie to you – going to market does not guarantee a sale. But whatever offers you receive, you can rest assured they are the best the market will provide at that time.
To learn more about business valuations and our process, take a look at this video from one of our founders, Dave Rebbettes.
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