Selling A Small Business

This week I have to enter into negotiations to buy a small business. The other side believes that it's worth a lot more than it is. It's my job to convince them that it's worth what are willing to pay. Unfortunately, its often difficult to explain the true value of a business to small business owners, who have invested the proverbial blood, sweat and tears.

The numbers, including some industry standards, show that we are paying the correct price (half of what they are asking). The seller, however, is uninformed of these methods and thus wants a higher price. Small businesses such as this are prone to overvaluing the effort they put into the business. What they often don't understand is that the more valuable they personally are to a business, the less the business is worth. Its simple, once the owner leaves, the value leaves with them. Kinda selfish really.

A small business owner should try to make the business run without them. Its the logic behind systematization. Makes it easier to sell. As Michael Gerber says in the E-myth, there are only two reasons for a business, to sell it or franchise it.