This article are provided for information purposes only, and are not intended as legal advice.

Buying a business – if you sell it yourself

November 16th, 2008

I just spoke to an owner who was looking to sell their property.  It had been for sale for two years with very little activity.  I asked some questions about the purchase price – how did you decided the selling price.  I was surprised that the answer was – it was our out of pocket cost what they were trying to recover.

Remember, a business is worth a value which may or may not have to do with how much you paid for the business.  If you over paid for the business, a new owner will not pay you for your mistakes.  If you spend $1 million on say an advertising campaign that produced no results and does not increase the value of the business? Do you think that an buyer will pay you for your mistakes.

In this particular company, there was an element of real estate in the company.  I asked who much was neighbouring properties were sold for.  They had no idea.  It was very obvious that there is a serioius disconnect between the valuation of the business and the market place. If the owner does not know what the same types of businesses are being sold for, how can they value their own business?

Selling a business by yourself saves you brokerage fees but in this case, the property was for sale for 2 years and no takers.  A business broker will hopefully assist you in the determination of purchase price and will market the business to prospective buyers.  See for a list of business brokers.

Filed under: valuation of a business — Gary Landa @ 10:50 am

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