Some of the sellers we have worked with have the approach that “it’s all or nothing. You WANT my business, you SHOULD want my business and I don’t NEED to negotiate.” Yikes! Business peers, friends and family might be saying that their business is worth $2 million when the financial statements and other variables show it is really worth about $1 million. The seller can get a lot of advice from people that either don’t understand the situation, don't have all the details, or have motivations that conflict with the reasonable price for the business. A seller shouldn’t get a price locked into their brain without room for negotiation. There is normally give and take when any deal is done and flexibility is how it happens.
Another important concept is listing age. Some sellers think that there will be a never ending line of prospective buyers. However, the amount of time that a business is on the market can affect buyer interest (and value!). We know this from so many years of doing deals. The first two to three months on the market are critical for buyer activity.
We use a real estate market analogy. A house that is on the market for 4 - 6 weeks usually has a dwindling number of showings because there is an unspoken concern that something is wrong with the house or that it is priced too high. (And I don’t want to be the idiot that buys it.) So proper pricing is critical to get buyers interested and willing to negotiate.
Bottom Line: In order to get your business sold, the business needs to be priced reasonably, and there needs to be give and take. Sellers need to have a good idea of what they really want from the deal and have some room to negotiate. If you or someone you know needs an honest assessment, please talk to one of our Apex Business Advisors.
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