Assessing what your business is worth is a crucial component of the process of putting your business on the market for sale. An appraisal consists of thoroughly analyzing your financials and factoring in other key variables to determine the true market value of your business.
Benefits of a professional appraisal include:
1. An appraisal will identify the value drivers, strengths and weaknesses of the business. This allows the owner to comprehend and address any potential problems prior to selling the business.
2. An appraisal will establish the true market value of your business, and help establish a reasonable selling price.
- It is difficult to rely on general rules of thumb and advice from friends when it comes to a business' true value. Such derived values are often too high or too low, prompting unrealistic expectations by the seller and prolonging the selling process.
- Simply put, a business will sell for what a buyer is willing to pay and for what a seller is willing to accept.
- It is important to realize that many people looking to buy a business are experienced, and will conduct their own scrupulous examination of the company even if the seller has not. They may use their own assessment against the seller during the negotiation process. A full comprehension of the true market value of your business will help in the negotiation process.
3. An appraisal provides an objective opinion to another legal entity or government agency that may be involved in the transaction. Where highly specialized industry-specific knowledge is required, or if there are abnormal time constraints, we may call in a third-party appraisal service to assist in the valuation process.
Read our related blog post on Due Diligence