Valuations and Business Appraisals
Anyone who has ever sold a home knows that an independent appraisal report had to be completed for the mortgage company to complete the sale. A business is many times more complex. The key to having a viable valuation performed on a business is to have it performed by an independent third-party valuation service.
Without a third-party report, a business owner should be prepared for heavy negotiations because it will by your opinion of value versus a buyer’s opinion. Be wary of any business broker who prepares his own in-house valuation report. A buyer will place no credibility in his opinion because he has a vested interest in obtaining a higher price than can be justified because it will increase his commission. A buyer will place no credibility in a value arrived at by the business owner’s accountant for the same reason.
There is a big difference in the quality of valuation reports that can be performed. Many brokers rely on generic valuation software reports that are based on unproven theories. You must ask yourself, “Is the report designed as a marketing tool or is it something that has to be put in a drawer and not shown to a buyer? Was true analysis of the business performed? Where factors such as industry trends, age of the business, client base, and other factors that will effect the price taken into consideration?”
The Fuller-Ross Group uses the services of the largest, independent third-party valuation service in America to perform these reports for our clients who are trying to secure full market value for their business. They perform thousands of business valuations each year and have the largest data base of closed transactions in the nation. They know what price other businesses, like yours, are really producing. Their reports are reader friendly and can be shown to prospective buyers. They go much farther than other reports because they recommend which assets to sell and which to keep. The same is true for the liabilities of the business. They recommend the deal structure that will be most likely to produce a completed transaction and at the best obtainable price. They do not stop there. They totally justify that the price recommended is the best obtainable for the business owner and the report proves the asking price is realistic to a prospective buyer.
Business brokers have consistently produced higher prices and smoother sales when one of these reports is presented as part of the business offering package than similar businesses produced that did not have the benefit of a comprehensive valuation report.
We strongly recommend that a comprehensive report be included in the offering package of any business being offered at $200,000 or above.