GlobalBX

Misconception 2. The buyer should be happy just because I am selling it to him.

Business owners invest their money, time and sweat in businesses. Sleepless nights, time away from family, no vacations – that’s what the owner gets, especially in the beginning. No wonder that all the above translates into substantial value in  business owner’s eyes. The history itself adds to the value day by day. “I built it from the ground up, I took it from $5,000 per month losses to $10,000 profit, I trained the employees, I negotiated the contracts – the buyer should be happy just because I am selling it to him…”.

Well, let’s look at it from business buyer’s prospective. Business buyers rightfully think that business financial performance is the common denominator. They don’t know how you got where you are and take your current business performance at its face value.

Lets look at the example of two similar businesses, Business A and Business B, each generating $10,000 in monthly net income for their respective owners. Business A was around for 10 years during which time the owner never had a vacation, worked 12 hours per day and defaulted on business loans twice. Business B was around for 3 years, has more employees, owner is rarely there. Although both businesses generate the same income, the perception of value for the Business A owner is greater because he invested more time and effort to get where he is, went through hardship, etc. Business B owner may be more skillful, or lucky, or organized, or had more working capital,… or all of the above. From business buyer’s stand point, Business B has greater value than Business A because it’s better organized and allows for more free time to the owner.

Business sale is performed between two equal partners: business seller and business buyer. Nobody is doing any favors to each other. Each side agreed to the terms of purchase and signed the Purchase Agreement. The buyer is paying what he feels is fair in today’s business marketplace and the seller accepted it.