Pricing a Small Business for Sale

ValuSource is the publisher of Pricing a Small Business for Sale:  A Practical Guide for Business Owners, Business Brokers, Buyers, and Their Advisors, by Toby Tatum, MBA, CBA.

Overview

Mr. Tatum explains why the marketplace for small businesses—where over 90% of individuals seeking to buy a small business never succeed in their effort—is one of the most inefficient markets in existence.  In an overwhelming majority of cases, buyers and sellers bring entirely different perspectives about business value to the bargaining table.  The real world reasons behind these issues should be understood and incorporated by business appraisers.

Mr. Tatum explains why appraisers need to understand the significantly different perspectives and expectations that business owners and potential buyers bring to a sales negotiation.

In Tatum’s own words:

In recent years, I’ve come across professional appraisals provided business sellers and buyers as pricing guidance that were entirely unrealistic.  The problem lies in the fact that a “fair market value” opinion, which many appraisers tend to rely on when valuing a business, is a model designed for equity transactions, which doesn’t match the way small businesses actually change hands in the real world.

Most small business sales are advertised, negotiated and ultimately transacted as asset sales, not equity sales. Understanding what this means, and how it works, makes a huge difference in determining a price for a small business that will actually satisfy both buyer and seller.  Moreover, many, many small business sales involve seller financing, and that factor, too, heavily affects appropriate value.

Using the insight gained from being a business broker, a business broker trainer, and a Certified Business Appraiser (CBA), Tatum shows the appraiser how to use the real world of actual sales to improve equity valuations.

Consider what some of the industry’s most experienced and well-regarded figures have to say about the significance of Tatum’s accomplishment in this book:

“I thought I knew everything about business valuation until I read Toby Tatum’s newest book. This will now set the standard for anyone interested in estimating the true value of a business.”  —Len Krick, MBA, SBA, CMEA. Certified Business Intermediary Merger and Acquisition, Master Intermediary Managing  Member and Principal Broker ,United Business Brokers of Nevada, LLC.

“Mr. Tatum’s book represents a significant contribution to the theory and practice of pricing small businesses for sale. This book should be of interest to any serious would-be seller or buyer of a closely held business. It should be of special interest to business brokers and to business appraisers who attempt to value small businesses.” —Raymond C. Miles, FIBA, MCBA, FIBBA, MS. Founder and former Executive Director of the Institute of Business Appraisers.

“The vast majority of small businesses offered for sale are never sold. The primary reason being the business is overpriced. If business brokers, business buyers, and sellers apply the information provided in this book, they will be 80 percent of the way to the successful purchase or transfer of a small business.” —Donna S. Dailey, M.Ed., LRED, CBI, SBA. Founder and President School of Business Brokerage, Greensboro, NC.