Appraisals and Pricing

Appraisals and Pricing

Note from Tom West:

Clyth lives and has his office in New Zealand, and some of the language, etc. may be different. But, if you read the following, you will see that business brokerage is not much different here in the states. (I like the term MPSP – it sounds much better than an appraisal.)

If you are thinking of selling your business you will want to know the Most Probable Selling Price (MPSP) before placing it on the market.

What you paid for it, what you need for it and what similar businesses are advertised for, may all have little relationship to current market value.

By law, every business broker must provide a written appraisal when listing a business for sale. This appraisal must be based on comparables – from sales of similar businesses.

We are fortunate that we have in-house data from thousands of business sales we have successfully arranged over recent years, and that we have access to BizStats which has transaction data from over 5,000 sales nationwide. These enable us to confidently provide owners with a credible opinion of value.

A recent survey in the hospitality sector showed that, on average, our appraisals were a remarkably accurate guide for the owners.

Of course, many times we list the business at an asking price higher than the appraisal to allow for the premium buyer. Also, we recognise that price may vary from value according to the motivations and negotiating skills of the parties.

Deal structure can also impact on price. Vendor finance, extra training, on-going consultancy, trade restraints, employment issues and lease problems are just some of the factors.

Listing with an experienced, licensed and specialised business broker can help you maximise the value you receive when you are ready to sell.

Clyth MacLeod, Managing Director of Clyth MacLeod, Ltd., in New Zealand has over 40 year’s experience in business broking and business valuation. Clyth is also a director of Business Appraisals Ltd (business valuers), BizStats Ltd (a national database of business sales information) and Australasian Business Valuations Ltd (consultancy). The only business broker to be awarded a Life Membership by the Real Estate Institute of NZ and a Fellowship by the International Business Brokers Association he remains active in the industry and committed to leading a professional team.