FB pixel
Importance Of Getting The Asking Price Right

The Importance Of Getting The Asking Price Right

There is a lot of work that goes into pricing a business, and our Brokers spend a great deal of time and attention on the financial recast and researching comparative sold businesses, so that we can recommend that our Sellers list their businesses at the most realistic selling price. We don’t want to just list businesses for sale, we actually want them to sell, which is exactly what our Sellers are hoping for too. In order to successfully sell a business, the most important factor is to get the asking price right, from the very beginning, and here’s why.

Increase your chances of selling.

The statistic that we are given by our professional association is that only 1 in 4 businesses that are listed for sale will actually sell. 1 in 4! Those odds aren’t great for a business owner who is hoping to sell their business and cash in on all of their hard work. Of course, businesses don’t sell for a number of reasons, but what we have found is that most businesses on the market that are just sitting there and not ever selling are priced incorrectly. Why go through all of the effort to get it valued, have it listed, and then never sell it because the asking price is unrealistic? It doesn’t make sense to us either. That’s why we work so diligently to get the asking prices of our listings to the most probable price that it will actually sell for. First and foremost, we are always honest with our Sellers, and we sometimes have to be the bearer of bad news that a Seller doesn’t want to hear: their business isn’t likely to sell for what they were hoping for. However, we will work as hard as we can to get them the most money possible for their business. If you really want to sell or in many cases, need to sell, then setting your list price correctly will more than double your chances of finding a qualified buyer and closing the deal. 

Don’t leave money on the table.

Time and time again, we talk to business owners who have sold their previous business without a Broker, and because they weren’t really sure what their business was worth or how to price it, they ended up selling it for a lot less than it was worth, leaving thousands of dollars on the table. Of course, that is a less than favorable outcome, because the owners didn’t get everything that they deserved from the sale of their business. Making sure that we get the asking price right will ensure that the owner doesn’t lose out on value that they have accumulated by making their business successful. Another unfortunate situation that we see is when a business is suffering, and the owner thinks they have no other option than just to cut their losses and close the doors. In some cases, that is the right course of action. However, in most situations where there are tangible assets to be sold, the business owner can at least get something back on their investment. We see too many entrepreneurs close up shop, leave all of their business assets in their leased space, and then the only one that benefits from that is the landlord or the next tenant. Why not see if you can get some cash for your business assets? We frequently sell failing businesses at their asset value, and the owners are able to recoup something, rather than nothing. The bottom line is that you need to get a professional Business Broker involved as early as possible, when you start thinking of possibly selling your business, because we can help get you the most money possible for your business. 

Sell your business faster.

The average small business sits on the market about 280 days before it sells; however, we very commonly see businesses for sale for 1-2 years before eventually finding just the right buyer. For most sellers, when they list their business for sale, they are ready to sell it and they would prefer not to wait 6 months, a year, or maybe even several years for it to sell. They still need to be running that business strong, not taking their foot off the gas, just because it’s for sale now. The business needs to be at the top of its game in order to attract a buyer that will pay top-dollar for it. So, the quicker it sells, the better. Getting the asking price right is the key to selling it quicker than other businesses listed for sale. If it is overpriced, it is just going to sit on the market and become stale, which will then lower the perceived value, in the eyes of potential buyers. When a buyer sees price reduction after price reduction, the thought is that there must be something wrong with the business, why isn't it selling? Sellers often want to just "see" if we get any activity with a higher price, or want to list it high, just in the hopes that the perfect buyer will come along and pay the overinflated price. We of course always advise against that as a selling strategy, because it simply doesn't work. Overpriced listings will sit on the market longer or they will just never sell. So, for a Seller who is serious about selling, getting the price right in the beginning will hopefully draw as many buyers as possible to the listing.  

Attract more buyers.

Business sales are not like home sales. They don’t hit the market and within days have lots of interest, multiple showings, and then hopefully get their first offer shortly after that. When a house is for sale, there will be many prospective buyers interested in it, as there is a large pool of homebuyers out there looking for the perfect house. In the world of business sales, there is a much smaller pool of possible buyers, and then you have to find someone interested in your specific trade, industry, or specialty. It is much more difficult to find the right buyer for a business. Therefore, when a business owner actually receives an offer, they should consider it seriously, and they should try to make that offer work, because there could not be any other buyers coming in behind them. So, the key for Business Brokers is to confidentially market businesses creatively, to an audience of the most probable buyers. The goal is to attract the most buyers possible in the beginning, while the listing is fresh and new. That way, any buyers who have been waiting for a business like this one to come on the market, can jump on it right away, if the numbers add up. We’ve attracted the most buyers that we can to the listing, but an asking price that shows the value of the business is going to keep them interested in learning more and taking the next step.

The value of the business is apparent.

We can attract as many buyers as possible to a listing, but if the numbers don’t make sense, and they can't justify the asking price, they will just disregard it as another overpriced listing. Most buyers are interested in one thing: owner benefit, also known as discretionary earnings. They want to see the bottom line…exactly what they will be taking home after all of the business’s expenses are paid. They then will be looking at the owner benefit, and comparing it to the asking price. Buyers need to immediately be able to see the value in the asking price. If the return on investment or ROI is favorable, then the asking price will make sense to a buyer. The majority of buyers aren’t buying based off of emotions, they are looking at buying a business for investment purposes. They will be looking at the numbers very closely, and if at first glance, the asking price seems too high compared to the owner benefit, then they will most likely move on to another opportunity that makes more financial sense. That’s why it’s of the upmost importance to get the asking price right at the very beginning, because that’s when the most eyes will be checking out the listing, and we will have the best chance of snagging the right buyer. 

If you are thinking of selling your business, we’d be happy to work with you to get the asking price right, in order to put you in the best position to sell. Give us a call today to discuss the details!