Business Appraisal when Buying a Business

Business Appraisal when Buying a Business

Buying a business is one of the fastest ways to become an entrepreneur and become self-employed. It can also be an easier option than starting your own business. One of the best ways to ensure a successful business acquisition is to obtain a business appraisal. Below we detail several benefits of obtaining a business appraisal when buying a business. For questions, schedule your free consultation!

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1. Finding a Great Business to Buy

While there are hundreds of businesses for sale, it can be hard to narrow down your options. This is particularly true if you don’t have a target market or industry. A few things to consider include your interests, expected return, lifestyle, and talents. For more information read Resources for Finding the Right Business.

Obtaining a business appraisal can help you better understand the operations of the business. It will also compare the business to similar businesses in the industry. A business appraisal will help obtain a broader landscape of information to better inform your decision.

2. Determining a Fair Purchase Price

How do you determine if the listing price is fair? Should you make an offer above or below the listing price? These are questions potential buyers of businesses ask us on a regular basis. A business appraisal will help determine a fair purchase price or fair market value. Many times, a seller determines the listing price for their business arbitrarily. As such they may lack solid information on which to base their purchase price. One of the ways a seller can strengthen an asking price is by obtaining a business appraisal.

On average, businesses tend to sell about 10% lower than the purchase price. This difference is primarily driven by the perceived risk of the business and the true cash flow of the business. Obtaining a business valuation will identify these risks and the cash flow of the business. This is information can help a buyer negotiate a fair purchase price that may be lower than the asking price.

3. Identifying Strengths and Weaknesses of the Business

One of the most valuable portions of a business appraisal individuals often overlook is the amount of detail a business appraisal provides about the business. This includes identifying the strengths and weaknesses of the business. This information can help negotiate the purchase price. And post-transaction can help determine your areas of focus as you continue to build the business.

4. Helping Grow Your New Business

A business appraisal is one of the best tools to help grow your newly acquired business. Peak Business Valuation’s focus is to build businesses that thrive. As such, a business appraisal can help highlight specific areas to grow and maximize the value of a business. A business appraisal identifies key value drivers. These are factors that significantly drive the value of the business. Peak Business Valuation has written articles on value drivers for dozens of industries. For specific information about an industry you are interested in buying a business in, be sure to check out our blog. You can also schedule your free consultation to learn what key value drivers for the industry look like.

5. Financing the Business Acquisition

Many business opportunities fall through due to inadequate funding or the deal taking too long to close. A business appraisal can help you understand the value of the business and provide a basis when seeking funding. There are a variety of financing options for those buying a business. See Financing a Business Purchase. 

One of the best options to buy a business is through an SBA 7(a) loan. This type of loan requires a third-party opinion to value the business. Peak Business Valuation provides thousands of business appraisals for SBA loans. We work with SBA lenders across the country. As such, we are happy to connect you with an SBA lender in your area or who lends frequently to your business industry. We are also happy to perform an SBA business appraisal for a lender of your choice. Schedule your free consultation today to get started!

Summary

Peak Business Valuation is here to help you confidently buy a business. Obtaining a business appraisal prior to buying a business is a very useful tool. When looking for a business to buy, be patient. Often finding the right business takes time.

Peak loves helping individuals who are looking to buy a business. Obtaining a business appraisal can help you feel competent and confident in your decision. Get started today by scheduling your free consultation!

 

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