May 11, 2021
One of the first questions our clients often ask us is, “How much should I ask for my business?” And although there are sometimes exceptions, our answer is usually, “Nothing!”
Of course, what we really mean is that we don’t advise putting a price on a business -- especially in a hot M&A market, because you’ll never get more that what you ask. And since the typical acquisition takes between nine and 15 months, the business can grow during that time period and become worth more than when the process started.
"Which offer is better?
If the seller had set an asking
price of $5 million, Offer B would
not even be open for discussion."
Every buyer will value a business differently. A strategic buyer will typically pay more than an individual because they see the value of adding a going business to their current operation and recognize the synergies and opportunities for growth.
Terms and what is included in the purchase price are critical factors when evaluating offers. For example, let’s say a selling company has $1 million in adjusted EBITDA and receives two offers:
Which offer is better? If the seller had set an asking price of $5 million, Offer B would not even be open for discussion.
Because there are exceptions to every rule, we also consider the following when advising whether to put a price on a business:
O&O can help determine the best marketing path and guide you through the complexities of the M&A process. For more information or a confidential meeting, call 913.64.0185 or email [email protected].