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Monday, August 16, 2010

Incorporate Valuations into Your Presentation

Peter King
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When you are meeting with a prospective client, it’s important to offer performing a business valuation. There are ways to effectively present the valuation to the client, showing the advantages to both the seller and buyer, which valuation is right for the client and using the right technique to be successful.

Approaches to Offering Business Valuations
There are three common approaches you can use when going forward to offer a business valuation to a client:
  1. Require the valuation prior to the listing;
  2. Strongly Recommend the valuation but not requiring it;
  3. Offering the valuation only when the opportunity presents itself.
Presenting the Valuation
When you are going to present the valuation, you have to determine the need for that given client – remember, not everyone is going to be a candidate for one such as in a book value deal.
You must educate the end user on why having a business valuation is important, showing how a valuation is advantageous. You’ll then have to determine the type of valuation you would perform, best suited to the client.
Remember, you need to motivate the prospect! Create the urgency. Show how this will lead to a quicker transaction; and always show the variety of services available to the client.
Valuation Advantages to the Business Owner
There are many reasons why performing a business valuation will be advantageous to the client. For starters, a business valuation will identify where the client’s business is now, and what direction it’s headed toward. You will be able to show the client where the strengths and weaknesses are to the business prior to selling.
Through a business valuation, you will be able to determine a reasonable selling price as well as prevent a lengthy round of negotiations with the qualified buyer. Less money will be left on the table as a result of performing a business valuation. And if the buyer is looking to obtain loans, a business valuation helps them pre-qualify for SBA financing.
Advantages to a Prospective Buyer
From the buyer’s view, a business valuation will assist with performing due diligence on the business, determine the fair market value and maximum price to be paid based on the buyer’s return on investment. A business valuation will show the SWOT – Strengths, Weaknesses, Opportunities and Threats.
Determining Which Valuation Type to Use
In order to decide the type of valuation to use for the client in questions, you must determine what the purpose of performing the valuation is. Whether the intended user is the buyer, seller, small business owner (non-seller), CEO/CFO, attorney or investment will be a major factor in which valuation model to use. The type and size of the business is another important element in deciding the valuation type as well as the operating structure of the business and history.
Techniques to Use to Obtain Payment
There are a few ways to go about selling the business valuation to a client; therefore, collecting payment for the services you’ve rendered. You can have the end user pay up front and reimbursed at time of the sale. You can present the valuation invoice along with the Confidentiality Agreement; obtaining payment at that time. You can present the client with the valuation or “hold harmless” waver.


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