It is very common for a business owner to overestimate the value of his or her business. This is quite natural since we all want our businesses to be worth as much as possible—especially when it comes time to sell. Because of a Buyer’s need to capitalize the acquisition, typically with some amount of debt, the cash flow to any new owner may very likely be lower than to an existing owner.
The Buyer Feasibility Test assesses a standard financial arrangement based on the terms a Buyer might find at a bank or other lending source. This potential financial structure is then applied to the company’s cash flow so a return on the Buyer’s investment may be calculated. The question here is simple: Would it make any sense for a Buyer to buy this company at this price based on a probable financial structure? If not, the price at which you offer your business may need to be re-evaluated. In this way,
Versant Business Advisors’ Business Valuation Model and report calculations may be just as useful in telling you what is not a proper value or a reasonable expectation as it is in telling you what a realistic valuation for your business is. For more information on how to perform a Buyer Feasibility Test contact us by email or phone.