Importance of a Business Appraisal
Would you buy or sell a house or commercial property without first having an appraisal? Most buyers and sellers of small businesses don’t bother determining a business’s true market value. Buyers are reluctant to spend money on an appraisal and sellers usually pick an arbitrary price or one higher than the business is actually worth. It is the selling broker’s responsibility to get the highest possible price for his client. Yes, the broker has a responsibility to be honest and fair to the buyer, but his primary responsibility is to his client. This leaves the buyer hanging out there with little sense of the business’ true value. He may bring in his accountant or other advisors but these people who are probably very good in their profession may not have the years of experience and skills necessary to determine the true market value of the business. Buying or selling a business is probably the largest financial transaction a buyer or seller will ever make in his life. It may involve his life’s savings, new debt or his entire retirement prospects. There are many situations where a buyer has paid too much for a business and can’t make it work. The buyer looses his investment, a bank may loose on its loan, and the seller will loose money he has lent to the buyer and possibly get a worthless business back. Doesn’t it seem important to confirm that the business you are buying or selling is a wise, or at least not a foolish sale or purchase? A Business Appraisal should be a mandatory process for any business sale or purchase. It definitely will increase the chance of success and protect the buyer’s and seller’s hard earned assets.