Problems of Improperly Valuing a Business

Pricing a business too high can result in the business not being sold for a long period of time; sometimes not at all.  If the business owner eventually adjusts the price to how the market is responding, the deal will often be tainted with the view that something is wrong with the business or that the owner is desperate, possibly resulting in an even lower business appraisal than it would have originally been valued at. 

• For instance, if, due to unknown reasons, a business owner thinks his company valuation is $1.7 million and the company valuation is really $1 million, this could be very detrimental.  Any offers that come in around the $1 million mark might be seen as low-balling and be quickly rejected by the owner.  This could cause word to get around that the business owner is asking too high of a price, causing the offers to stop coming in.  Once this happens, the business is soon seen as damaged goods, as it has been on the market too long and no longer has any offers available.  To decrease the price would be wise, but the perception of the business being damaged goods would inevitably be present.

Pricing a business too low can often result in the business owner not realizing the full benefit of their investment, ultimately losing out on the full company valuation.

• For instance, if it is misunderstood how certain factors affect valuing a business and your company valuation is $1 million, but it is actually $1.7 million, you will in essence lose $0.7 million in the sale.  This is very problematic, because you are not realizing the true value of your business and in the end lose an extreme amount of your potential profits.

Due to the above reasons, it is very important to take the time to get an accurate business appraisal.  Our business valuation service is available at a low cost to provide you a company valuation that you can then base your potential sale price upon.  By getting a company valuation through our business valuation services, you reduce, and potentially erase the risk of pricing a business too high or too low.