Don't Be Discouraged by a Lower Business Valuation
July 03, 2024
by a lender in Falmouth, MA, USA
- If you're in the process of buying a business and have a commitment letter from a lender, a lower-than-expected valuation can seem like a major obstacle. Remember, this isn't the end of the road but rather an opportunity to re-evaluate and strategize.
A lower valuation can actually be a good thing:
1. Better Deal: It might mean you are getting the business at a more realistic price, ensuring a higher return on investment and lower leverage. Use the findings from the valuation report to request a price reduction.
2. Negotiation Leverage: Use it as leverage to negotiate better terms with the seller, such as larger seller note and longer standby period.
3. Improvement Potential: A lower valuation often highlights areas for improvement. Post-purchase, you can focus on these areas to increase the business's value.
If you have questions about how other buyers have handled lower valuations, please feel free to reach out to me. I'd be happy to share my experience from numerous deals I've been involved in.
from University of New Brunswick in Saint John, New Brunswick, Canada
from York University in Mississauga, ON, Canada