We, in the M&A world call it the 80% rule. 80% of buyers never buy anything and 80% of businesses on the market don’t sell. Through my professional experience of 25 years and observations within the industry I must conclude that this rule of thumb is accurate! I believe that there are many factors at play that make this an unfortunate and embarrassing statistic such as:
Many businesses are priced incorrectly because the broker is lacking valuation skills;
The broker believes that it’s not important to get the value right because “the market will sort it all out”.
The broker has approached the market “hiding” business flaws instead of “disclosing and discussing” them.
FACT: Those businesses that are valued correctly have a much higher rate of being acquired and they sell for a price closer to or equal to the value.
Understanding the fact that the odds are not in your favor, you the owner must look deeper than just the highest value and ask the broker the following question, “Can you defend that value?” “Show me how you will defend that value”. The broker’s answer to that question may tell you if you are likely to be victim of the 80% rule or if you are going to be an exception.
So, pick your representative carefully, don’t be distracted by the highest price and demand that the broker show you how he will defend the value.
Contact us at https://arizonabizsales.com/contact-us/ or 623-295-9620 for a no hassle no obligation conversation.
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