Selling one’s life’s work—this is a step that is not particularly easy for anyone. Parting with the company becomes especially difficult when the successor is not a family member. How can the business owner know whether he has chosen the right buyer? And whether the buyer has paid a fair price? Stefan Butz, an appraiser specializing in business valuation, explains what to consider to ensure the sale takes place at a fair price.
STEFAN BUTZ on the importance of business value:
“One of the most important questions entrepreneurs ask themselves before initiating a succession or sale process is what the company is worth. There is a great need for clarification here, because this question is not easy to answer. Some preliminary work is necessary. However, it’s an effort that pays off. After all, a well-documented business valuation is of paramount importance for a successful succession process. With a solid valuation as a foundation, difficult discussions and negotiations can be handled more easily.”
…on the benefits of a valuation:
“The added value of a professional valuation depends on the circumstances. A solid business valuation—whether in brief form or as a detailed report—increases the likelihood of a successful conclusion to the sales process and an optimal price. When considering whether such a costly valuation is even worth it, the business owner should ask themselves this question in return: What are the consequences if I enter the process without any idea of my company’s value? What am I risking?”
…on the right approach:
“The reason and purpose of the valuation, as well as the company’s specific situation, determine the choice of method. In general, the income approach has become the standard even for small and medium-sized enterprises, because a potential buyer is purchasing future profits. For companies with low earnings, however, the net asset value plays an important role.”
…on the specific characteristics of SMEs:
“With SMEs, particular attention must be paid to dependence on the owner, on a major customer or supplier, and to the interconnection with the owner’s private life. These dependencies must be acknowledged and scrutinized in the valuation and, depending on the answers, have a greater or lesser impact on the company’s value.”
