Thursday, May 29, 2014

6 Ways a Business Valuation Prepares You for an External Sale

According to studies on business succession in Canada, more than one third of those surveyed are expecting to sell their business externally to a third party. [1]
"We should remember that good fortune often happens when opportunity meets with preparation."
― Thomas A. Edison

Business owners looking to sell their business to an external third party should take note.  There is tremendous opportunity to sell for a significant premium because many business owners are not properly preparing.  The preparation for this begins with a business valuation and solid value enhancement plan.  The good fortune comes in the form of 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 and, without proper education, many will either grossly overestimate or underestimate the value of their business.  If you plan to sell your business to an external party one day, obtaining an independent business valuation is an investment that will pay for itself many times over.  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 done;

2. A professional valuation helps to justify the asking price and provides support for negotiating the price with a potential purchaser;

3. 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 strategic purchasers are often willing to pay more than “stand-alone value”; 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 through 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 their odds of good fortune.

If you are considering an external sale, contact us at or to start your preparations with an independent business valuation.

1.  Sources: 2007 RBC Study - Quantitative Study of the Business Succession Market in Canada and CICA/RBC Business Monitor (Q1 2010).

1 comment:

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