I had coffee a couple of weeks ago with a young professional who was on a mission. His goal was to buy a business.
Perfect timing, I told him, there should be plenty of businesses out there, and at bargain prices.
What I learned from him, though, is that the businesses for sale in his price range--$1 to $3 million--were being offered by owners with unrealistic estimations of what their companies are worth…He saw a parade of companies offered by transaction intermediaries that I know and like. All of the those comapniesy had owners who were unwilling to make concessions to the reality of market value.
This $1 to $5 million transaction size is a tricky arena. It is hard for a business broker to tell the owner to be realistic or refuse the listing…And only the very best company can attract a boutique investment banker. A lot of time gets wasted by serious minded people who want to make a deal. In this case, a 40ish, law school educated guy who has run companies and now has cash in his pocket to buy one and some high quality business brokers.
From an Exit Planning perspective, we represent sellers, in advance of their sale and the first thing we try to get them to do is to get realistic. WHATEVER THAT MEANS TO THEM... If they need a certain amount of money to retire and this business is not worth that much now, can they work and grow the business for a few more years? If they need to get out now, can they afford to get by on what the business is actually worth???
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