We have suggested earlier that the business-selling process begin with an initial valuation based on latest and most complete financials available at the time.
Selling a Business
The diligence period and diligence process should be defined and scheduled by the Offer to Purchase. The ‘subject to diligence’ clauses should contain an expiration date, after which, if not first satisfied and removed by the beneficial party, the offer or acceptance may be withdrawn by the other party without penalty.
The Offer to Purchase should include the value of and the valuation basis of the assets included. In a share sale, assets and liabilities included will typically be valued at balance sheet or book value, while in an asset sale, maybe at appraised value, or fair market value, or simply at agreed value.
And in our experience selling small businesses, the right buyers have almost exclusively been total strangers to the business.
Eventually of course, if, when and as both parties agree that a good business fit does seem to exist, then business identity, introduction and other disclosures will be necessary to the progression and completion of a sale.
In our view, the value of a small privately held business is typically that amount which is equal to the net value of its balance sheet plus the value of its goodwill.