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How We Develop a Pricing Strategy for Your Business




One of the first and most important discussions we have with a business owner is what we think their business is worth. For some owners, price is the go/no go decision point: I need X from the sale; can I get it?”

Developing a pricing strategy is one of the most valuable services a business broker provides. We use our experience in the industry and data to give the owner a range that makes sense in the current market. We’ve said before that “Clearly” is in our brand because we believe in being transparent throughout the whole sales process, both with sellers and buyers.

Two factors help us determine the right pricing strategy for a business. The first is comparables. Comps tell us what similar companies, with similar revenue and, most importantly, similar cash flows (EBITDA and SDE), have sold for over the past year. They’re a reliable predictor of what buyers are willing to pay, which can vary with market and economic conditions. For example, interest rates affect the size of the buyer pool and the amount they can offer for a company.

The second important factor in determining pricing strategy is pre-qualification from a lender. We always consult with an experienced lender to see if they believe they could finance a company at our preferred asking price. Again, we’re completely transparent with our owners. We let the seller know if a lender says the financing won’t work or tells us the owner must hold a note.

Then we make a decision together about pricing. Of course, we’ll try to list the company at the high end of the range, as long as we can justify the price through comps, the company’s financial position, and a bank's willingness to lend. We’ll aim for the highest sales price we think is reasonable, but we never agree to an inflated price that the numbers can’t support. Savvy buyers don’t make offers on overpriced companies; we’d just be wasting everyone’s time.

Then, we let the market give us feedback. What’s unique about our Franchise Clearly Network™ is that our sellers have access to the same data we do. They can see how many buyers we have in our system, how many matches there are for their particular industry and area, and, most importantly, buyer activity. Sellers receive weekly update reports with the number of inquiries, number of qualified buyers, and their information, along with buyer feedback.

We market the listing and generate as much interest as we can among motivated buyers. We’ll give the company a few months or so and then have another conversation with the seller. We may have had some hits, but no real inquiries. We may have had interest from buyers who have a lower offer in mind. Or, there may have been no activity at all.

We let the seller decide the next step. We might lower the price just a bit to see if we get more activity or decide on a price closer to the middle of the range of comps we researched. The seller may opt to offer seller financing to make a deal easier for more buyers. We may hold the price because the seller has time on their side.

For many sellers, pricing strategy is based on how quickly they want to sell. Some owners will take a lower price to get out of the business sooner. Some will hold the price where it is, working on making the business more efficient, profitable, and, ultimately, more attractive to potential buyers. Whatever their decision, we know they’re making an informed one based on real-time market data. If we can help you understand your company’s value in the current market, get a complimentary and confidential opinion of value.

 








About Franchise Clearly®
Franchise Clearly® specializes in reselling franchise businesses. Working with owners, they work through a defined proprietary process that finds highly qualified buyers and guides them quickly to the closing table. Their innovative team approach makes for a seamless process that nets the highest offer and the best terms possible for the seller.





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