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Selling Your Business: Valuations

Business for sale

How much is my business worth? For a business owner considering retirement, this is often the hardest question to put a number to. After all, there’s no neat way to reflect a life’s worth of struggle, risk, grit and passion into a number; which these days, is often the first metric noted on a profile. Some online platforms won’t even list your business unless you state an asking price, therefore having at least some idea of a price range is necessary to form a successful exit strategy.

Experienced M&A business brokers can help determine the most appropriate range, using current market data as a guide. However, it is always important to remember that these metrics are only there to help initiate a process of negotiation between seller and buyer. The majority of private transactions do not publicly disclose the purchase price, and large industry mergers at the top will skew the average multiples in the lower middle market. Most businesses also have at least one unique feature– location, a patent, percentage of recurring revenue, goodwill, etc. -that can raise their valuation dramatically. Despite the immense influence economic trends seem to have on the initial conversation, the key that makes or breaks a deal always boils down to whether the seller and buyer can agree on how they perceive the company and its value at that moment.

This difference in perspective is often the key to understanding where each client’s focus lies. A buyer values a company based upon the profits it could bring in the future, while the seller considers all that it took to build and grow the company thus far. A great business broker helps these two visions meet, so that the successful business can go on far after the founder(s) retire. It’s tempting to say that this is all common sense, but so many deals go astray because talks relied on the market to lead them to the end, and neglected those key considerations. 

Here at Gottesman Company, we understand the needs of both sellers and acquirers, especially in the exciting market conditions of the modern day. We work with our clients through the turmoil, the mundane, and the uncertain to facilitate deals, and secure legacies. If you are a business owner that is considering an exit, or an investor seeking to acquire, reach out in confidence by phone at 212-330-8010 or fill out our quick questionnaire. We look forward to hearing from you!

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