Small Business Today Magazine APR 2014 MONTGOMERY ROTH | Page 24
EDITORIALFEATURE
Eight Reasons Why Fair Market
Value is Insufficient to Motivate a
Business Owner to Sell
By Jeffrey D. Jones, ASA, CBA, CBI
T
here are many reasons why business
owners decide to sell their business
such as retirement, ill health, divorce,
or partnership issues. However, if
the only motivation to sell is price, it is unlikely that buyers will pay a price that will
be sufficient to get a deal done. Often,
business owners have price expectations
based on personal reasons such as the
amount needed for another investment,
the need for lifelong retirement funds,
or replacement of income for less work.
None of these reasons are motivations
for buyers to buy. The price must be
supported by earnings derived from the
business. Due to the risk of small to midsize businesses, there are economic limits
as to the price buyers are willing to pay.
However, that price may be insufficient to
motivate sellers to sell.
5. FMV rarely will fully compensate an
owner for the time and expenses of
starting and building a profitable busi
ness.
6. The busines