I'll buy your business for double whatever valuation you have
Yes, I'll pay you double whatever your business is worth. And I'm making that offer blind as I've no idea what figure you've got on the table.
But it doesn't matter about the figure.
It doesn't matter if your figure is a million pounds or a trillion pounds. I'll pay double.
How can I afford to do this? Because I've got one small caveat - I'll pay you double your valuation, but I get to decide the terms of the agreement.
Almost no business acquisition happens at an all cash price. The seller is usually offered their "consideration" in a mix of some cash up-front, some in instalments, some in shares of the acquiring company etc.
It's called the "deal structure".
And as a trade-off for agreeing to pay double your valuation I get to choose the deal structure. Fair enough?
Do you still want to go ahead with selling your business to me? Remember, I'm paying double.
Before you commit, let me describe the deal structure I have in mind. I'll pay you £1 today and I'll pay the rest in £1 per month instalments for as long as the business is making a profit and till the debt is cleared. You'll continue to bear all liabilities and stand surety for the overdraft and any loans / credit the business enjoys.
If I make a pig's ear of running the business, and it stops making a profit, then I don't owe you any further money.
As you'll have recognised, it ain't such a good deal. But ...
That's the type of deal for which every sharp buyer is aiming. Their specially trained negotiators have three simple rules on price:
1. Keep the cash figure as low as possible, even £0;
2. Spread the rest of the payment on the best terms possible and
3. Tie future payments to success i.e. pay only out of profits.
They have no rule about headline price. They'll pay whatever figure you want if they can get their own way, or mostly their own way, on everything else.
That's why your valuation is worthless.
A business that's "worth" £100K is also worth £100 Million with just a few tweaks to the deal structure.
So whatever valuation a broker has given you, even one of the ridiculously inflated valuations some brokers are notorious for handing out, is completely achievable.
But at what price? To nick (and then mangle) a phrase: Valuation is Vanity, Sterling is Sanity.
Is an all cash transaction possible? Yes, it is. But it involves a trade off on price. Sign up for my newsletter, I explain the best ways to a cash transaction. And some more on deal structures and how you can come out ahead with both a good cash price AND good terms.
There's more to selling a business and getting the best deal than most vendors appreciate. Get in touch if you wish to discuss your own situation and how best to play your cards.