Rules of Thumb are for the Birds

Rules of Thumb are for the birds

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In the world of small business sales and mergers and acquisitions every buyer thinks every business is overpriced and every seller thinks its worth more than what you tell them. Over the years “industry experts” of which I am apparently one, bandy about “rules of thumb”. In other words….business X sells at 2 x cash flow or 70% of sales etc etc etc.
I recently had a broker call me up and tell me that a business was overpriced (not her job) and that the proper valuation method was a $ value per customer. Oddly enough a month prior she had a different position entirely (#notethesarcasm).
Valuation is an art and there is data to support proper pricing. But in simplest terms there is not one method that is correct; however sellers need to be particularly cognizant of market dynamics like supply and demand and inventory levels.
Yes even in small business sale and mergers when inventory is low, or the demand spikes prices go up. You as a seller and buyer may not like that but it is a critical component to the sales cycle here in Central Florida.
As for the broker….turns out when you have no inventory of your own and your listening to a customer (buyer complaining of too high a price) you tend to err with the buyer. The witty retort to the broker was supply and demand applies in this world too….by the way the business went under contract in 24 hours at asking price so looks like the market is truly the dictator of price.

www.yourfloridabusinessbroker.com
Location: Winter Park, FL, USA

Comments

  1. MIchael Shea PA Orlando Business BrokerFebruary 9, 2017 at 5:14 PM

    Learn More about selling your business at www.yourfloridabusinessbroker.com

    ReplyDelete

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