How to Sell Business in Singapore?
This may be surprising for most business owners looking to sell business in Singapore but businesses often do not sell for their appraised value. They do not have to sell their business at the appraised value, they can in fact sell their business for higher if they wish (most would!). Business owners that have gotten to grips with this piece of information are better positioned when making decisions as to whether they should buy or sell a business.
Price versus Value
Price is specific to individuals in a buy-sell discussion. It is the amount of cash (or cash equivalent) on the table when anything is bought, sold or put up for sale. A sale needs an offer, a party that accepts said offer and the exchange of money (or other means) as a means of securing the offer. Some buyers may be willing to pay more than others, possibly for a strategic or other financial reason, because they can benefit from economies of scale or synergies that are not available to all. The term ‘value’ often refers to ‘fair market value’ or ‘fair value’ during business valuation.
Fair market value is defined as the price, expressed in terms of cash equivalents, at which there is an exchange of property between a buyer and a seller, both of which are acting in an open and unrestricted market and which neither is under any compulsion to buy or sell and when both have reasonable knowledge of any relevant facts.
Realistically, the eventual business sale in Singapore may occur at a different price point than the fair market value. This is because the individual parties have their own perception of the risk and return associated with any investment. There are various other reasons, of course, including a lack of relevant knowledge about the transaction or the subject company.
Another reason why value and price may differ is timing. Often, a business valuation is done months before the company is sold/transacted. Any differences in, for example, market conditions could cause the company’s selling price to depart from its appraised value. Also it can be just for the simple reason that the buyer just likes the business so much it is willing to pay a premium for it!
Price and Value Are Not Synonymous
It is important for both buyers and sellers to understand that, sometimes, the appraised value of a business may not accurately reflect its future selling price. As described above, value can vary substantially depending on the situation at the time of appraisal.
If the reason of a valuation is to establish an asking price, valuators usually give a range of values that considers various scenarios. This range can help a buyer and seller arrive at a reasonable selling price based on the individual expectations of risk and return.
As an example, take a look at some of the business listings on this business for sale platform in Singapore and you can see that the prices for the businesses are generally set randomly.
Read here on the top reasons to do a business valuation.
If you are planning to buy or sell a business in Singapore, it is recommended that you contact a business valuation professional for guidance. Speak with us today.
