Updated: Feb 18, 2020
At NOVUS Business Brokers, we found Inexperienced sellers tend to set a price (usually on the high side) before they’ve determined value. The reason this is such a big mistake is that price is the single most important factor in determining how long a business stays on the market. We have taken the time to conduct a thoughtful valuation process before assigning an asking price.
There are many different methods of business valuation. A traditional ‘desktop’ valuation involves the use of a mathematical formula. This makes your company’s annual operating profit and multiplies it by a figure.
This figure is dependent on historical trading and past financial performance. It is typically calculated on several variables including the industry sector, past deals in that sector, and arbitrary metrics like return on investment over a set time.
Acquiring a company is principally about strategic motive, and on many occasions, the final price paid far exceeds any standard industry valuation. Also, a company’s true value lies in its future potential, not it's past historical performance.
When pricing a business for sale, we list your business without a value attached for the very reason that it encourages haggling, value reduction, and bargain hunting.
Only an acquirer with a strategic motive and a sense of the future potential for your business can decide its true worth, and it is our job to ensure that the market understands the scope and true value of each business we represent.
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