Once your business broker has completed the valuation of your business and you determine the bottom line figure meets your expectations, it is time to decide whether you disclose a price for your business or go to market without it.
I am often asked by new clients (who are always sellers), “why do you show a listing price? Aren’t you putting a ceiling on what potential buyers will offer for my business? Shouldn’t we go to market omitting the price and getting buyers bidding on the business?”
Oh, if only that were the case! The reality is going to market without a price for the business does not foster a bidding war on your business but, instead, can have the opposite effect – buyers will often “take a pass” on your listing. Buyers are not stupid, but they often think sellers are. When a “real” buyer sees a listing, which has some initial appeal to him, but with no price shown, the buyer often assumes the seller has unrealistic expectations. The buyer is then reluctant to fill out the required broker NDA and other disclosures, which will then enable him to learn more about the business, including the price.
A buyer does not want to spend the time and energy to get information on the unpriced business listing only to find out that (1) the business is severely overpriced and/or (2) the broker advises the buyer to just make an offer without giving any pricing guidelines. These two potential eventualities can both upset and anger the buyer to the point where he avoids entirely listings without prices.
So, unless your business is a one in a 100 situation, with very unique and compelling attributes, we always recommend that our seller clients go to market with a realistic listing price on the business. The seller’s goal is to encourage the right buyer for his business, not discourage him from even taking a close look at the opportunity.
Contributed by Michael Greengard, Praxis Business Brokers.
Through the Michigan Chamber’s partnership with Praxis, we can guide you through a step-by-step process of the complexities, all while maintaining complete confidentiality. To learn more about selling your business, please contact Lindsay Fulton at firstname.lastname@example.org or 517-371-7691.