As an integral part of the first stage of the selling process, valuation of the business is one of the most important issues. It is highly recommended that sellers obtain a third-party business appraisal from a well-respected business appraisal company. A business broker / intermediary should not be the one to appraise the company and they are generally not sufficiently qualified to do so. Even if they feel that they are qualified, a broker's own business appraisal can create doubt in a buyer's mind and, in many cases, can create potential legal liability. However, the most important issue to understand is that regarding credibility and believability with potential buyers and lenders.
Credibility and believability with buyers is an issue when the seller's broker is the one who has appraised the company. They sometimes see the interests of the seller being placed in front of their own. Often, third-party business appraisal companies reduce or eliminate this issue.
Experienced and successful professionals in the business brokerage industry know this is generally the key to maximizing the selling price of a company, eliminating the largest portion of frustration and disappointment, and saving all parties involved a great deal of generally expensive time. While most sellers believe that their company is worth more than what actual market value is, there are many instances in which sellers receive less for their companies than they should. An appraisal from a well-respected, third-party business appraisal company creates credibility and believability with buyers and lenders while at the same protecting and maintaining the seller's interest in his/her company.
If the seller waits until the buyer appraises the company, then it is the buyer's best interest to obtain an appraisal on the company that is as low as possible. Likewise, waiting for the lender to require an appraisal will only delay the entire process. Therefore, since an appraisal will probably be performed sometime during the selling process, it is in the Seller’s best interest to obtain a business appraisal in the beginning stages, not after the company is marketed to buyers. Additionally, it is critical that sellers realize and understand that most lenders require a third-party appraisal.
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Business Appraisals are also referred to as Business Valuations and are very helpful during the buying / selling process of a company. We strongly recommend them for owners considering exiting company ownership as well as for those considering acquiring a company.
Business Appraisals have the following benefits:
For Sellers:
- Protects the seller's asset(s)
- Maximize sales price
- Establish credibility and/or justification for the price of the company
- Reduces and eliminates time spent negotiating regarding the issue of value
- Enhances "broker-friendliness" of the company
For Buyers:
- Reduce or eliminate a sales price that is too high for a company
For Sellers and Buyers:
- Reduce or eliminate adversarial elements of the issue of value between buyers and sellers.
- Establish credibility of value with lenders
- Expedite qualification and financing process.
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