It is critical to distinguish between the terms “value” and “price.” Price is determined by supply and demand at any given moment. Individuals, on the other hand, assign value based on their profile and interests.
Price, in our experience, is generally a result of the effectiveness and quality of the sales process. Thorough planning, well-presented, clear documentation, access to a wide selection of candidates, effective confidentially management and proper offer negotiation will ensure you with the best price possible for your business.
The more offers a firm receives, the more likely it is to find the best buyer since more offers imply more bargaining power.
If you scour the market for potential buyers and obtain a variety of indicative offers, it will be easier to determine the price range that the market is willing to pay.
As a result, we will concentrate on the globe of prospects who may acquire or invest in your firm.
The quality of every stage of the process has a real influence on the final price. A company with an embedded value of 100 could have a poorly managed process meaning that the company is sold for 60, whereas a well-managed process could raise the selling price to 140. More than a 100% difference.
If you do end up selling your company, it is because you consider that you have either got the best possible price or at least a price that you consider acceptable under the circumstances. It is possible that, not having managed the process well, you might have inadvertently lost a lot of value.
Consider a business owner who wishes to sell a firm with an embedded value of $20 million. If the buyer is an acquisition specialist and the firm owner (the seller) decides to bargain alone, without the assistance of an M&A counsel, the deal is likely to conclude for $15 million or less. Remember that experienced buyers might use a variety of strategies to wear you down and confuse you in order to obtain a lower price.
If, on the other hand, the seller decides to professionalize the sales process, he will be able to sell his company for more than $25 million. He will prepare the company for sale with the assistance of an M&A advisor, bringing thoroughness to the process via well-prepared documents that highlight the most valuable aspects of the company, he will look for and find buyers willing to pay the most because they are the most interested, and he will increase competition between them so that their offers increase. His advisor, an experienced negotiator, will ensure that the price is maximized while also protecting his client’s interests.
Experience has taught us that a well-managed and well-executed sales process has a significant impact on the final price and terms of a transaction. By selling your company, you are converting years of work and effort into value, and you have the potential to create or destroy a large portion of its value in a short period of time. It is entirely in your hands.