Those who have bought and sold businesses, property or even that late-model used prestige vehicle, will know how hard it is to negotiate a fair price with a vendor that believes their asset is worth more (often lots more) than the market value.
Valuations can be obtained for all sorts of purposes. Walking into a negotiation with a professional valuation in your hand can save a lot of time and frustration.
Many buyers act on impulse and emotion. Even if the vendor does not recognise that the asset is worth less than the asking price, with a detailed valuation the “true value” will become evident.
Most businesses need to obtain a formal valuation for stamp duty calculations, arranging finance, insurance and for the company balance sheet. Amazingly, many company directors don’t obtain a valuation until after the purchase has been made.
Given a valuation is required in many cases anyway, why wouldn’t any investor commission a valuation prior to negotiation and take advantage of that professional assessment?
Comparatively speaking, valuations are quite inexpensive. In percentage terms, the cost is normally a fraction of 1% of the value of the asset. For example:
- a $1.5M property in a metropolitan location might cost around $1,500 for a market and insurance valuation
- a valuation for a business turning over $20M pa would typically cost between $10,000 and $15,000.
Ian Hyman, CEO of Hymans Valuers and Auctioneers says:
“I often talk to prospective clients about the cost of a valuation in the same terms as when they are selecting a private school for their children. While I am not proposing that your financial assets are worth more than your family, substantial effort is put into investigating aspects such as facilities at the school, recent academic results, and seeking input from friends that have children at the school.”
The bottom line is that in making any major decisions, whether it’s our children’s education or making a large investment, such as purchasing property, business or plant and equipment, you need to be able to make informed decisions for your family and financial future.
By accessing professional expertise and understanding the “true value” of a potential purchase you will be in the best possible position to negotiate an optimal outcome!