BV Benefit #4 - Sale of a Business to a Third Party

According to recent studies on the business succession market in Canada, more than one third of those surveyed are expecting to sell the business externally to a third party. [1]

"We should remember that good fortune often happens when opportunity meets with preparation."

- Thomas. A. Edison

This quote is aptly applied to situations involving the sale of a business to a third party, the fourth benefit of obtaining a professional business valuation.   For business owners today, the opportunity represents the short window of time before the aging baby boomers begin to flood the market with businesses for sale. The preparation begins with a business valuation.  The good fortune comes with a sale of the business for the maximum possible price.

For many business owners the sale of their business is a once in a lifetime event.   Once a business owner has committed to selling the business the question becomes - for how much?   Many business owners, for various reasons, grossly overestimate or underestimate the value of their business.  Investing in an independent business valuation is an investment that will pay for itself.   Here are 6 reasons why:

1. An independent valuation helps to manage the business owner’s pricing expectations which increases the likelihood of getting a deal closed;
2. A professional valuation can help justify the asking price and provide support for negotiating price with a potential purchaser;
3. Having an independent valuation prepares the business owner for any unsolicited offers received from competitors or other industry participants;
4. The valuation process can help identify potential purchasers or purchaser categories;
5. The valuation process educates the business owner regarding "stand-alone value" and "synergistic value" and the notion that value is different to different purchasers; and
6. A valuation ultimately helps the business owner maximize the sale price, ensuring no money is left on the table.

Many business owners looking to sell their businesses will not take advantage of opportunities in the current marketplace with proper planning, including a professional business valuation.   On the other hand, those that are prepared with a professional valuation and keen sense of market timing will vastly increase the odds of having good fortune bestowed upon them.

Stay tuned for our next discussion on how a business valuation can also be used for internal transfers of a business to existing shareholders, management or employees.

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1.  Source: "Quantitative Study of the Business Succession Market in Canada, RBC and CICA/RBC Business Monitor (Q1 2010).