Fundamentally, business buyers are interested in acquiring a future profit stream. Any risks, real or perceived, that will cause that profit stream not to continue as expected, reflect what price a business buyer will pay.
Two key features, then, ultimately motivate business buyers. The first is ‘profit’. Declared profit levels can be checked against financial reports and records.
The second in ‘return’, usually expressed in % terms. ‘Return’ in the business buyer’s eyes is the answer to the question ‘how long will it take to get my money back?’ The higher the ‘return’ the faster it comes back and minimises the business buyer’s risk.
‘Price’ is driven by ‘return’. The higher the return offered by the business owner, the lower the price.
The wide words on Mr Justice Burt in Reynolds v Commissioner of State Taxation 86 ATC 4528 when he said “what rate of interest (% return), having regard for all the disadvantages of the business, would a buyer expect to receive in order to move him to buy.”
90% of enquiries will be eliminated if the ‘price’ asked and the ‘return’ offered don’t reflect value in the business buyer’s eyes.
If your offer won’t ‘move’ a business buyer, your enquiries will be negligible, or worse , there will be none at all.
If you need more information or help, please talk to me
Graham Long
Kevin Lovewell
M: 0401-308-385E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers
Graham Long
M: 0428-649-791E: Click here to contact Graham Long
Member & Registered Business Valuer
Australian Institute of Business Brokers
Kevin Lovewell
M: 0401-308-385E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers
What others say about Kevin Lovewell
Graham Long
M: 0428-649-791E: Click here to contact Graham Long
Member & Registered Business Valuer
Australian Institute of Business Brokers
What others say about Graham Long
