Acting as an intermediary between business buyers and sellers, you could call business brokers the ‘estate agents’ of the business-sales marketplace, whether they like it or not. Just like a property agent, they help you find interested parties as well as overseeing negotiations for the sale. And like an estate agent they can help you arrive at a realistic asking price – on this score, however, the broker’s job is often considerably more complicated. While a residential property can be valued by aggregating the prices of similar sized properties in the same area, valuing a business is a more complex proposition. Not only are there the bricks and mortar to account for, but also the income, outgoings and liabilities, the staff, customer and client contracts; and the value of the equipment and stock. More complicated and intangible factors also come into play, e.g. the value of the brand and customer goodwill. Valuing a business realistically without professional assistance is therefore difficult (although some businesses can be valued according to a multiple of earnings, such as a grocery store, in addition to the value of property and stock). Pricing your own business, in which you’ve sunk so much of your own time and money, is also difficult to do objectively. BusinessesForSale.com has spoken to countless business brokers in South Africa and around the world, and none have ever reported a problem with under-valuations. Overvaluations In fact overvaluations are one of the biggest obstacles to finding willing buyers. Even where a seller has sought the opinion of a business broker, their advice is sometimes ignored. A business intermediary will have experience in valuing businesses and –importantly – they are objective. Having forged the business from scratch, you’re likely to have an emotional connection to your business and unable to view it critically. Numerous business owners sell a business without the help and expense of a business broker and achieve their asking price. However, if you can cope without the help of a professional agent, I recommend using a valuation expert, whether a broker or accountant. Problems can still arise even with a broker on board. An agent may have precious little experience in business valuation, but if they have experience of businesses valuations in your sector, all the better. There are unscrupulous agents who deliberately overvalue your business in order to gain your instruction – and perhaps an up-front fee –only later encouraging you to drop your price. Alternatively, overvaluations could be due to the seller’s error. If you give them inaccurate or incomplete financial records then you make it impossible for the agent, however experienced, to generate a realistic valuation. Another danger is that the seller bases his or her valuation not on the profitability and potential of the business, but on their own financial needs. A vendor might base the asset’s value purely on the figure they need to recoup to cover loans and pay the agent, banks and other creditors. But prospective buyers aren’t interested in your financial circumstances. This might seem obvious, but sellers could subconsciously allow their financial needs to affect their business valuation. Again, this illustrates why getting an independent viewpoint of the business’s value is imperative. How businesses are overvalued The seller has generated the price themselves without adequate knowledge of valuation methods The business owner needs to achieve a greater price to cover loans and pay agents, banks and other creditors The seller has provided the agent with inaccurate or incomplete financial records The agent is inexperienced The agent is deliberately overvaluing in order to win the seller’s custom As managing editor of BusinessesForSale.com, Adam Bannister commissions and writes content about all aspects of how to buy and <a href="http://australia.businessesforsale.com/australian/sell-a-business">sell a business</a>. He also manages content for other titles in the Dynamis stable, including FranchiseSales.co.uk, Franchise Sales Magazine and BusinessWings.co.uk, as well as being an occasional contributor to Start Your Business Magazine.