Tuesday, 18 December 2012

Price is based on what someone else is willing to pay!

Many business owners have an inflated view of the value of their company. 

This is understandable, considering they have put so much money, time and energy into building their enterprise to where it is today.  However, they need to realize the price is based on what someone else is willing to pay for it.

So, what are the factors that drive or impact the value of your business?
First, start with what motivates Buyers to buy businesses:
·         Financial buyers are looking to maximize their return on investment.  These buyers are looking for acceptable levels of risk and return;

·         Sometimes buyers are your competitors looking to eliminate a key competitor and/or build sales volume and economies of scale;

·         Scalability is in many cases a motivator.  Buyers may have a related business in a different market or they my higher or lower in the supply chain looking to save costs or improve integration;

·         Being one’s own boss and master of their own destiny is high on the list of motivators for individual buyers;

·         As well, individual buyers may be looking to “buy a job”

·         There may be a patent or technological advancement a business may possess.  Buyers looking for these competitive advantages may be motivated to act on their desires.

Whatever the Buyers motivation are, it’s wise for Sellers to understand the impact they may have on value in their business.  By leveraging those motivations into a compelling business opportunity, Sellers are more likely positively impact their business value, increase the likelihood of a successful transaction and be happier with the final outcome.
Do you have a small business question you would like answered about this article or others?
Bill Sivell is a salesperson with VR Windsor Inc. [www.vrwindsor.com] 519-903-7807, which sells businesses to buyers across Canada and around the world. His 14-year career includes diverse senior management positions in marketing, advertising, sales management and operations management. His blog appears every Tuesday.


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