Importance of an RWS Valuation - Are you paying too much?

Savvy buyers want to ensure they are acquiring a synergistic business that meets their personal and/or corporate objectives. If you are a buyer (individual, corporate, or investment group) and are considering buying a business where the value is in question, it is incumbent upon you to obtain a competent, professionally prepared independent third-party business valuation. Requiring the seller to open up their financials and business operations to due diligence in an effort to pinpoint a price range comprised of fair market value and strategic value is a legitimate request. Should the seller resist, then there is something they are most likely seeking to hide; buyer beware!

Beyond due diligence, another reason buyers should conduct a business valuation is to fulfill commercial lending requirements associated with banks and SBA loans. When an individual buyer seeks bank financing to purchase an existing business, some lenders will require a price and consequent loan justification, validated through a third party business appraisal. If real estate is involved, you can be assured an appraisal is required. In other instances, lenders may require a complete business valuation to justify loan proceeds.

The fees associated with a business valuation typically should be covered by the seller. When a buyer pro-actively requires that a valuation be conducted, then the fees normally are paid by the buyer and then adjusted for in the final purchase price. Fees also may be evenly split or credited in full by the seller.

In theory, it is the seller's responsibility to know the value of their business, but that is not always what a buyer will find. So, protect yourself with a professionally prepared RWS Business Valuation.

To learn more about our business valuation methods, please contact us today or call us at 877-797-2825.

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