Are you Pricing Your Business too High?
When business owners prepare their company for the market, a common misconception is a high price translates to a high offer. This isn’t the case, as most qualified buyers won’t take a second look at a business that is priced too high based on economic realities.
It is a typical practice to ask for a higher price than the offers you anticipate receiving, but aim too high and fewer people will consider taking over your company, and you’ll end up with few serious offers. Selling your business involves more than just advertising the price you want.
To determine your ideal asking price, begin by asking yourself the following questions.
Questions for Determining if Your Asking Price is Too High:
- What are your sales trends?
A healthy business usually can demonstrate year over year top line growth. A “flat” year is acceptable now and then but a business that has proven and predictable growth will command a higher price on the market.
- Are your expenses in line with your sales?
Since almost all small businesses are valued based on some metric of adjusted cash flow, it’s important to keep on top of expenses, including the cost of goods sold, in order to maintain steady and predictable profit margins.
- What does the economic future look like for your industry?
The world is always changing, and your business needs to keep up with the evolving economy. Be honest with yourself regarding the future of your industry and tweak your asking price as needed.
- Are you letting your emotions get involved?
It is impossible to run a business without growing emotionally attached in one way or another. It’s easy to forget that sentimental value is unique to your own experience and does not have an impact on prospective buyers. It is important to price your business from an objective standpoint.
Need More Help?
Asking yourself the above questions is a great start for gaining perspective on your business’s price point.
For further assistance, it’s a good idea to schedule a free, no-obligation analysis with The Bridlebrook Group. If you decide to work with us, we will guide you through every step of the process, giving you the highest chance of selling your business at a favorable price.