About two-thirds of nearly 1,000 business owners surveyed recently by Pepperdine University’s Private Capital Markets Project expect to transfer their ownership in the next 10 years. But will those owners be able to sell the fruits of their years of labor for an acceptable amount? Maybe, maybe not.
A business is a tricky thing to plan. First, the business is a thing in motion rather than an asset at rest. And second, businesses are a hard asset to value appropriately. Does your retirement plan and maybe your estate plan for your heirs rely upon the business? Well then, do you know what your business is actually worth?
For a sobering problem many business owners end up facing when it comes to valuing their business, be sure to read a recent article in Forbes titled “Is Your Business Worth As Much As You Think? Many Aren't.”
At the core of the article is an interpretation of findings recently released by Pepperdine University in its 2014 Capital Markets Report. The key finding: buyers and sellers of businesses cannot agree on how much they are worth. Instead of negotiating back and forth to an eventual middle ground value, about 1 in 3 engagements fell through without any sale at all.
Now, keep in mind that it is always in the nature of high-pressure deals to come to such divisive and decisive ends. However, all the same there is a lesson to learn when so much is at stake.
What is your business worth and how do you prove it? How do you approach the sale and how do you structure your assets thereafter? This is a complex transaction. Putting it into the proper context and value is essential both in the beginning and the end of the process.
Reference: Forbes (March 2, 2014) “Is Your Business Worth As Much As You Think? Many Aren't”