I am not a car salesman! But I wouldn’t exactly say I lack experience, either. In fact, although it seems hard to believe, over the last four decades of driving I have bought more than 30 cars and trucks (when you add cars for the wife and the five (now grown) kids). I have even made it my policy over the years to sell the old “trade-ins” myself, to make sure I get top dollar.
So, you may be wondering, “What does this have to do with selling a business?”
LESSON 1 – When selling anything do your research – before you agree to an offer!
If you are selling a new or used car, there are online resources that will help you discover the dealer cost or approximate market value of that year, make, and model.
If you are selling a business, there are various online reference guides with historical data and comps organized by business type or industry that can be accessed on a subscription basis. Although they are not as accurate as a broker’s valuation, all business brokers “worth their salt” pay for these services and use them to help buyers or sellers determine a reasonable price (usually by applying a published multiple of the business’s average earnings). Banks also use similar research services to help determine how much they will lend.
LESSON 2 – Never pay an unreasonable price. But also never offer something for sale at an unreasonable price, unless you really don’t want to sell it.
Sellers often have an idea of the value of their business that is not based on objective standards that come from solid research. This can cause a loss of potential income when a business is underpriced, or more commonly, a waste of time and money when it is overpriced.
“There is a fool born every day,” but in the world of business investing, they are pretty hard to find! Buyers are savvy and banks who are in the business of doing acquisition loans are going to do their research. And since everyone’s time is wasted when a deal is unreasonably priced, most buyers aren’t even going to inquire on it, much less give it serious consideration or take time to make a counter-offer.
SADLY, over-zealous business brokers who are either unknowledgeable or unscrupulous, often agree to list businesses at unreasonable, even ridiculous, prices. They so badly want the listing that they are unwilling to risk offending the seller by showing them the objective research that would help them establish a more reasonable price. They just “throw it up on the wall to see if it will stick,” and six months later are forced to crawl-back to the seller to inform them that the price needs to be drastically dropped. And even worse, by then the good buyers have already left the room and are unlikely to revisit the deal.
LESSON 3 – Buying or selling a car is much easier than buying a business.
When buying or selling a business, always use a professional, ethical brokerage firm like CBI Team. We can properly evaluate the business, successfully negotiate the deal, and navigate the sale all the way to the closing table!
Now, how much are you willing to pay me for my car? Keep in mind that I have had it a long time and am pretty emotionally attached.