I run a small retail shop (hardware, 12 years in business). Thinking about selling in the next 12-18 months. I keep seeing conflicting advice about whether to get a formal valuation before listing. Some say it's a waste of money, others say it gives you leverage. What's the real story? I don't want to overpay for something that just tells me what I already suspect.
Valuation
Getting a valuation before listing your shop
Paid for one last year before listing my auto parts store. It was useful mostly for catching problems early. The valuation came in lower than I hoped, but it forced me to clean up my books and fix a few lease issues. Didn't necessarily give me pricing leverage, but it saved me from a nasty surprise during buyer due diligence.
Depends on the buyer. If you're selling to a strategic buyer or someone using SBA financing, they'll have their own appraisal anyway. A pre-listing valuation mainly helps you set realistic expectations and avoid wasting time with lowball offers.
How much did it cost, roughly? I've gotten quotes from $3k to $10k and can't tell if the expensive ones are ctually better or just have nicer websites.
Mine was $4,500. Mid-range firm, local. The $10k quote I got was from a bigger name but the scope wasn't much different. I'd ask what exactly they include, like do they normalize add-backs or just run a formula on your tax returns.
That add-back point is helpful. I have a couple of personal expenses running through the business that I'd want documented properly. Sounds like the cheap online valuation tools won't catch that
I sold my bakery two years ago without a formal valuation. I just used a broker's opinion of value from my listing agreement. It worked out fine, but in hindsight I think I left money on the table because I didnt understand my own numbers well enough to push back on the first offer.
That's the real benefit, understanding your numbers. Not the piece of ppaper.
Also check if your industry has standard multiples. Hardware might be different from, say, a service business. A valuation will tell you where you fall in that range butt you can probably find the range yourself with some digging.