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Ovepriced Businesses

Written on the 28 June 2009 by AIBB

Selling a business can take time so you need to make sure you attract and negotiate with suitable buyers from the start. If you don’t the process could blow out to years and result in you receiving less than market price.

Many business owners find it takes several years to sell their businesses and when they do the price is a lot less than their expectation and often less than the market value. How does this happen?

The first few weeks of selling your business are critical. Most buyers are monitoring the market and waiting for suitable businesses to become available. Your best buyers are the ones that show interest as soon as the business goes on the market. They are seeking to invest in businesses with sustainable incomes, with definable risks and good returns. They will be either speculative buyers looking for a bargain or more conservative buyers looking for a secure investment. They are sophisticated and unlikely to pay more than the market value of a business.

If you overprice your business you will first attract buyers who are looking at larger scale businesses. They will not see value in your business. At the same time you will not attract buyers who can afford the true value of your business because of the high advertised price.

Inevitably the business stays on the market with little interest being shown. You therefore drop the price to the true value of the business. Now buyers who can afford it will notice the business but will perceive it to be flawed because it has been on the market for a long time. This will prejudice them against buying it.

With no alternative you drop the price to less than market value to encourage interest. The property is now snapped up by bargain hunters.

ABSC recommend that when selling your business you need to demonstrate the value of your business to a potential investor and price it accordingly. This ensures you attract the right buyers at the right time and receive the true value of your business.

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Author: AIBB

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