sales@deal-studio.com
(800) 239-5085
Schedule a Demo
  • Home
  • Platform
    • Industry Websites
    • Professional Content
    • Lead Capture Tools
    • Sales CRM
    • Deal Management
    • Integrated Workflows
  • Marketing
    • Branding & Design
    • Digital Marketing
    • CBR Design
    • Social Media Graphics
    • Company Newsletters
    • Email Campaigns
  • Insights
  • About
    • Who We Are
    • Our Story
    • Our Team
    • Testimonials
  • Contact Us
  • Home
  • Platform
    • Industry Websites
    • Professional Content
    • Lead Capture Tools
    • Sales CRM
    • Deal Management
    • Integrated Workflows
  • Marketing
    • Branding & Design
    • Digital Marketing
    • CBR Design
    • Social Media Graphics
    • Company Newsletters
    • Email Campaigns
  • Insights
  • About
    • Who We Are
    • Our Story
    • Our Team
    • Testimonials
  • Contact Us
  • Home
  • Platform
    • Industry Websites
    • Professional Content
    • Lead Capture Tools
    • Sales CRM
    • Deal Management
    • Integrated Workflows
  • Marketing
    • Branding & Design
    • Digital Marketing
    • CBR Design
    • Social Media Graphics
    • Company Newsletters
    • Email Campaigns
  • Insights
  • About
    • Who We Are
    • Our Story
    • Our Team
    • Testimonials
  • Contact Us
  • Home
  • Platform
    • Industry Websites
    • Professional Content
    • Lead Capture Tools
    • Sales CRM
    • Deal Management
    • Integrated Workflows
  • Marketing
    • Branding & Design
    • Digital Marketing
    • CBR Design
    • Social Media Graphics
    • Company Newsletters
    • Email Campaigns
  • Insights
  • About
    • Who We Are
    • Our Story
    • Our Team
    • Testimonials
  • Contact Us
Blog
Home Selling a Business How Important is the Asking Price?
Selling a Business

How Important is the Asking Price?

Deal Studio June 27, 2012 0 Comments

Depends on whom you are asking. If you’re the seller, you might say that the asking price is too low. The buyer would say, obviously, that the asking price is too high. How can they both be right? Who decides?

Most sellers have an idea of what they want for their business. It can be based on their knowledge of the industry and what similar businesses have sold for. It may be, however, based on just a wish. There is the old, but true, story of the two partners who decided to sell their business. When asked what the price would be, they both responded with the same answer – $2 million. When asked how they arrived at that price, they each said that they wanted to be a millionaire and two times $1 million was $2 million.

Sellers often say that the asking price doesn’t make any difference since it can always be reduced. What they don’t realize is that if the price is not realistic, buyers won’t even look at it. Buyers are aware that they can make an offer, but if the starting point is too high, what they consider a fair price may be so low that why bother even making the offer.

Studies using various data bases comparing actual selling prices of businesses with their asking prices show that the difference is about 15 percent for small businesses. The larger the business, the smaller the spread. Businesses sold for $1 million-plus sell for about 90 percent of the asking price, while smaller ones sell for about 85 percent of the asking price. The important thing to remember is that the data is based on sold businesses only. There is no data, obviously, comparing the businesses that didn’t sell.

Sellers have to keep in mind that starting with too high an asking price may well prevent a very qualified buyer from even looking at the business. You know your price is too high and that you will come down, perhaps even significantly, but the buyer doesn’t. What is the right price? A business broker professional has tools to help sellers arrive at a reasonable starting point. There may be comparable market data based on similar sales. There are methods based on the cash flow of the business and a multiple using other business factors such as location, down payment requirements, competition, annual sales variations and other determinants.

Ultimately it’s the marketplace that decides the ultimate selling price. Serious sellers listen to the marketplace. After all, if 10 buyers are willing to pay X for the business and there are no other buyers, the price is X. The seller doesn’t have to accept that price, but he or she must accept the fact that the market will only pay X for their business.

Since studies of thousands of business sales show that the sales price ends up being, on average, 85 percent of the asking price – so sellers shouldn’t dream or wish for too much.

35
594 Views
PrevWhy Your Business Won't SellJune 27, 2012
The Very Expensive Desk LampJune 27, 2012Next

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recent Posts
  • How Leases Factor into Business Sales March 29, 2023
  • How Can You Identify a Serious Buyer? March 17, 2023
  • Are You Cut Out to Own a Business? March 8, 2023
  • Can You Buy a Business Without Collateral? March 1, 2023
  • What is a Partnership Agreement? February 22, 2023
Categories
  • Blog 22
  • Buyer Articles 106
  • Buyer FAQ 15
  • Buying a Business 34
  • Content 1
  • Financing the Deal 7
  • General Business Brokerage 9
  • Marketing 6
  • Marketing for Business Brokers 1
  • Promotion 1
  • Seller Articles 296
  • Seller FAQ 35
  • Selling a Business 195
  • Uncategorized 2
  • Using a Professional 6
  • Valuation 14
  • Workflows 1

Automate, accelerate and elevate your deal making
Email sales@deal-studio.com
Phone (800) 239-5085
Request Media Kit
Platform
» Industry Websites
» Professional Content
» Lead Capture Tools
» Sales CRM
» Deal Management
» Integrated Workflows
Recent News
  • How Leases Factor into Business Sales
    March 29, 2023
  • How Can You Identify a Serious Buyer?
    March 17, 2023
  • Are You Cut Out to Own a Business?
    March 8, 2023
Newsletter

Terms of use | Privacy Policy

© Copyright 2022 Business Brokerage Press, Inc. All Rights Reserved.