The Value/Price Dilemma
A seller of a healthcare business is looking to maximize the value of the transaction from a personal and financial perspective. The complexity of maximizing value is what leads to the value/price dilemma.
When sellers initially seek a valuation of their business the nature of the valuation depends on the source of the valuation. Whether for a divorce proceeding, a loan, or other financial matter a healthcare business value may be initially presented by an expert, but then negotiated further in the process. If a business is being valued for a potential sale by a seller representative, the valuation becomes a pricing for the marketplace, much in the same way a residential home is priced for marketing by a real estate agent. Complicated analyses may be used but there is inevitably attention given to the market from the current and historical activity of potential buyers.
What adds further to the dilemma for sellers is the nature of the offer from a potential buyer and what that really translates into as net proceeds for the seller. In essence, value is interpreted from multiple perspectives, the options are narrowed with the price asked and resulting offer, and the truth is all about net proceeds after taxes.
The implications for sellers?
First, no one will ever see the same value as a seller who has built the business over time. Second, the most successful seller keeps in mind the perspective of a buyer so that they maximize value opportunities. Third, while the selling price is important, the translation of the offer into a net proceeds reality is where the seller typical fully discovers the truth of the transaction.
So, when a seller begins the journey we always suggest they take a long look at the entire process including what is most important for their bottom line.