Any research you’ve done on Buying Businesses will teach you that a Business ultimately sells for what someone is willing to pay for it. An asking price for a business is basically an opinion since COMPS for similarly sold businesses don’t exist.
You can show 10 Income and Expense Statements to 10 different Business Brokers/Bankers/Appraisers and get 10 different valuations.
When you locate a business fits that your needs, the first step is to research the financials, the operation, talk with the Broker and/or Owner and learn as much as you can about the business. After conducting this step, you have a good idea what you’re willing to pay for the business.
The second step in buying a business is making an offer contingent upon successful completion of due diligence. If you think the Seller is overpriced and the business will never sell for what they’re asking – offer what you’re willing to pay and see where it takes you.
Don’t let an overpriced business scare you away from submitting an offer.
Many Sellers will reevaluate their pricing model when an offer is presented and at the very least, counter you. It opens the door to communicating with the seller and initiates the negotiation process. If the seller doesn’t accept your offer or after several counters you don’t feel like you’re making progress, you can always go on to the next Business Opportunity.
