Unrealistic Price Expectations When Selling a Pharmacy
If you owned a home with five bedrooms and three baths in a neighborhood with similar homes selling for $450,000, and you decided to sell, would you put it on the market with an asking price of $700,000? Of course not. You would know it would be a big waste of your time and effort.
The same applies to your business. If the business is worth $450,000 and you are trying to sell it for $800,000, you’re wasting your time and effort – and it will frustrate you unnecessarily.
Via public records, the market comparisons for housing are well established, so estimating the fair market value for a home is not all that complicated. Evaluating the value of a pharmacy is much more complex. As a reminder, small businesses are valued based on the expected cashflows to the buyer, and so comparative valuations are not nearly as easily determined or relevant, especially with file buys because these are based on the cost structure of the buyer more so than the seller. Also remember, sometimes a buyer really needs a particular pharmacy and will overpay for it.
Qualified buyers won’t even look at overpriced businesses
Nearly 100% of the time, businesses priced outside certain parameters do not sell. Many serious prospective buyers have already been through the ordeal of dealing with sellers’ unrealistic expectations and will not even take the time to further investigate a business they know is overpriced. That’s a huge problem – qualified buyers won’t even look at overpriced businesses.
Trying to sell an overpriced business will be one of the most painful things you ever attempt to accomplish. If your expectations are unrealistic, it will simply not result in success. You will regret the day you ever started the process. Make no mistake, you should try to get the absolute most money you possibly can, and we will fight for you to do this, but asking for an unreasonably out of market price because “that’s how much you need to retire” is fruitless.
Make no mistake about it, we will fight to get you top dollar for the store, but you are not getting a multiple of earnings above the market unless you have damn good reason.
Unfortunately, overpriced businesses are common, accounting for a large percentage of the reasons businesses are not ultimately sold. An owner that has been through the painful process of trying to sell his overpriced business may feel so “burned” by the process that he decides not to sell at all, and the business is just liquidated, or withers away. It’s a shame. Most businesses with adequate SDE, assuming there are no other significant obstacles, can be sold relatively painlessly – if they are reasonably priced.
Do you know the fair market value of your business and how that measures up versus your expectations? Give ColonyRX a call and we will tell you on the spot.
