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Infographic: Closing deals with a defensible business value

Sageworks
January 19, 2018
Read Time: 0 min

From the lack of proper documentation to a sudden change in the market, there are many reasons businesses fail to sell. One of the primary issues facing the sale of businesses is the valuation gap. A valuation gap is the difference between the owners perceived value and the actual market value. For example, a business might not trade hands because the owner is not willing to sell at a price that is lower than his perceived value. On the flip side, a buyer might not be willing to purchase a business at its selling price because they have reasonable doubt of the proposed value.

M&A and business brokers both report this reason alone as top reason for a deal not closing. In order to avoid having deals fall apart, it is important for business owners to have a clear understanding of the value of their business that can be presented and defended to potential buyers. Using this as a motivating factor in presentations with potential clients can increase your chances of winning a new client. If a potential client wants to sell his or her business at a particular value, it is best that they have certainty as they move towards the ideal date they wish to sell.

After delivering a valuation to a client, if they don’t like the current value of their business, consider providing tips for improving business value. For example, by simply increasing the businesses cash flow or access to capital, a business may be able to increase its value. This approach can turn a one-time valuation into repeat business for reassess how a business has been progressing after it has made vital changes.

 

Additional Resources

Book: Tech Roadmap for Selecting the Ideal Solutions to Thrive in Business Advising

Whitepaper: Changes in the Business Valuation Industry: Opportunities and Pitfalls

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About the Author

Sageworks

Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

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