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Problems of Improperly Valuing a Business


Valuing a company too high can result in the business not being sold for a long period of time, or sometimes not at all. That’s why using business evaluation services can make the difference. If the owner adjusts the price to how the market is responding, the deal will often be tainted with the view that something is wrong with the business. This could possibly result in a lower business appraisal than the company would have originally been valued at.

For instance, let’s say a business owner thinks his business appraisal is $1.7 million and the valuation is actually $1 million. This could be very detrimental to valuing a company, as any offers that come in around the $1 million mark might be seen as low-balling, and could be quickly rejected by the owner. This could cause word to get around that the business owner is asking for too high of a price, ultimately impacting the number of offers coming in. Once this happens, the business will usually remain on the market far too long with not many offers available. To decrease the price would be wise, but the perception of the business being damaged would inevitably take over.

Valuing a company too low can often result in the owner not realizing the full benefit of their investment, ultimately losing out on the full business appraisal.

For instance, if it is misunderstood how certain factors affect valuing a company, and your company valuation is $1 million but it’s actually $1.7 million, you would lose $0.7 million in the sale. This is very problematic, because you are not realizing the true value of your business, and in the end lose an extreme amount of your potential profits.

Due to the above reasons, it is very important to take the time to get an accurate business appraisal. Our business evaluation services are available at a low cost to provide a company valuation to base your potential sale price on. By getting a company valuation through our business evaluation services, you reduce and potentially erase the risk of valuing a company too high or too low.