Don’t pay too much for a business.

Don't pay too much for a business.

Don't pay too much for a business. Over the last thirty years I have produced hundreds of business valuations, for a number of reasons. Whilst most clients were more than satisfied with the result of the business valuation report, some were surprised that the valuation came in lower than expected.

Quite often business owners have an exaggerated opinion of what their business is worth. Some apply multiples from public companies to their own small enterprise and expect the market to pay this price. Others base their business value on hearsay or gossip about what a similar business sold for. One thing is certain, a strong valuation report always has added value to the client: when they are satisfied with the value, they have the correct information to use during negotiations with prospective buyers. When the client is not satisfied, he can derive various action points from the report that will help him strengthen the company and improve the value over time.

One aspect of business valuation that is frequently overlooked is the benefit that is gained from having a business valuation report prepared for the purpose of buying a business. It is in the interests of almost all the parties associated with the seller, be they business brokers, the owners themselves or their accountants, to get as high a figure for the business as possible. Sometimes there is no rationale for the asking price of a business. Not only will a business valuation focus on  areas of concern or future improvement, it will ensure that you don't pay too much for business. It will explain the calculations performed and  also elaborate on the assumptions underlying the parameters applied. This will explain why certain multipliers or discount rates were applied to arrive at the conclusion of value. All our business valuation reports are concise, understandable  and completely transparent. It is always worth remembering that the small cost of a business valuation can save many tens of thousands of dollars during a business transaction. Don't pay too much for a business.

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