Is EVERY Business For Sale at “Right Price”?
As a Business Broker based in Florida I spend ample amount of time prospecting/marketing for prospective business sellers and prospective business buyers. Â I use various marketing methods to market to both buyers and sellers. Â While in the process of Â prospecting for business owners considering the exit or sale of their business it is not uncommon to hear “I would be interested in selling my business Â if I can get the right price”.
Recently I engaged in such a discussion- the owner told me he would very much like to sell his business and start a new somewhat unrelated business if the could get the right price for his business. Â I then asked what he felt may be the right price and he followed up with “I don’t know”.
The “right price” Â may not equal to the business value, or the price a qualified interested buyer is willing to pay.
For an actual transaction to be consummated, Â the right price needs to resemble actual business value. Â If the “right price” Â is actually 2-3 times what estimated value of the business is, it is probably best for all parties involved to spend their time elsewhere.
But is everyÂ business for sale? Â What if a “sweetheart deal” is presented to Â a small business owner in Florida? Â If you had a business that is not “For Sale” , and you know it to have an approximate value of $500k Â and someone walked in and made you a cash offer of $800k cash is your business now for sale to that party?
From my personal experience of business ownership, I think yes most businesses are for sale if the “price is right”. Â But not all businesses. Â While owning my previous business in the 10th year Â I had gotten a significant offer for the business, but I had long terms plans and Â aspirations for the business. Â At that point in time I had made several acquisitions and made several other offers on other related businesses and was comfortable with valuations, synergy calculations, Â and felt I knew what the value of Â my business was. Â There was a lot of merger and acquisition activity that was occurring in my industry at that point in time and I was presented with a cash offer from a Â very strong company, and was at about a 25% premium to what I and my CPA viewed as current value. Â So I had a very strong cash offer from a well qualified business- do you take the money and move on.?
In my opinion business values are affected by both Â macro and micro economics. Â What is the state of the economy, what is the state of the merger acquisition economy and what is the state of your industry/your business? Â These elements effect what sort of multiple of cash flow your business may be worth. Â If the economy is such that valuations were/are Â running high do you look to exit your business because valuations, and or those high multiples may not come around again?
In my situation I consulted with my “trusted advisers” around me my CPA, my attorney, my wife. Â Yet ultimately the decision was mine. My CPA did tell me something that strongly influenced that decision. Â He had told me “You,ll know when you are ready”. Â It was a great price great offer, but I wasn’t ready and ultimatelyÂ sold my businessÂ 10 years later and got fair value for the business.
So is every business for sale if the “right price” comes along. Â I think that most businesses are for sale if the right price comes along, but not all businesses.