Pricing the Potential of a Business

By Hoke - Last updated: Saturday, September 1, 2012 - Save & Share - Leave a Comment

I have a saying: The buyer buys a business that shows potential but pays for history.” If the buyer does not see growth potential, the buyer will usually not buy it. The buyer may see a potential but doesn’t let anyone know. As an example the buyer may be a marketing expert and sees an opportunity to grow the business in a way the seller never envisioned. Or, they may know there is a great opportunity to raise prices. There always is something.

Yet when it comes to pricing and making an offer, unless the business shows a very strong year upon year growth the buyer pays based upon a multiple of historical performance. First time buyers often assume they will not at first operate the business as well as the seller and expect an initial drop in sales rather than growth.

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Posted in Business Valuation, Pricing the Business • • Top Of Page

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