Fair Market Value

Divestopedia published an article titled, “Letting the Market Bridge the Valuation Gap”. This article explores how to use fair market value as a way to bridge the gap between the valuation business owners feel they deserve and that which they are likely to receive. This increases the chances of a deal actually taking place. Here are some of the key points from the article.

Understanding The Reality Of Selling A Business

Only a low percentage of businesses sell on their first attempt. The article points out that only 10% of businesses that are for sale are actually sold three years later. Selling a business can be difficult. Most sellers have never actually sold a business. Working with a business broker can help you through this complex process. It is critical for business owners to have realistic expectations about valuation.

Four Points To Consider

According to the article, there are four business characteristics that will ultimately drive the sale. These are contractually recurring revenue, growth rate, durable competitive advantage and customer concentration.

A single customer representing a large percentage of your business is a problem. If your company is dependent or partially dependent on a single customer, the new buyer is going to want you to stick around a lot longer to ensure that this key customer isn’t lost. Things get more complex if intellectual property is involved.

It is important to work with a business broker that understands valuation. You want to receive the best possible price for your business. A business broker will help you obtain a fair market value, so your business doesn’t remain unsold for years.


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