To Price Or Not To Price
We get asked this question a lot by our clients and there are important benefits and psychological considerations for your potential buyers depending on your approach.
Let’s assume for the moment you are seeking a final sale price of $130,000.
Really you have 3 choices when it comes your pricing strategy, so let’s take a look at these and the various benefits of each.
1. A fixed price on your sale – “$149,995”
This approach allows for some negotiation of the price and gives your potential buyer the opportunity of a “win” by buying under the asking price. Buyers have high levels of fear when negotiating a business purchase so psychologically negotiating a price below asking mitigates some fear and keeps the buyer engaged. Pricing under the big psychological numerical values like $100,000, $150,000, $200,000 also helps overcome a psychological barrier within itself.
2. Offers over – “Offers over $130,000”
This is a clear guide to the buyers that $130,000 is a minimum price and you are hoping for more. This method does still have some of the benefits of a psychological win for your buyer if they can keep it to $130,000 but also gives you the opportunity, if the buyer is hot or your have multiple buyers, to try and negotiate a little more out of the deal. It also has a lower initial asking price so should see higher levels of enquiry from your advertising vs $150,000. More buyers can afford $130,000 than $150,000.
3. No price at all – “Offers invited”
This method allows the market to value the business for you which, if you really have no idea of the value range, can be beneficial. The main negative here is that in our experience you will receive less enquiry from the advertising simply because buyers have no idea if you are in their price range.
Secondly you can expect offers to start low simply because buyers will be seeking your lowest price, so negotiation upwards will be the name of the game which can be hard if the price starts off too far away from your target.
Bonza Advice for a successful sale.
Get a firm understanding of your target price and use method 1 or 2. You can see some more information on methods of valuing here.
If you choose method 1 and set your asking price, price it no more than 15% over the target price. If you go much higher, most buyers wont bother making an offer and will look elsewhere.
Also consider the various price brackets and don’t price the business too high within these. When buyers search for your advert online (which 99% of buyers now do) they will input a price range , generally these run in $50,000 bands so ensure your initial asking price falls within the same band as you target price.
So if your target price is $130,000 then you would NOT price above $149,999 because your buyers are likely to search for opportunities up to $150,000 and will not see you.
If your target price is $145,000 then price at offers over $145,000 rather than put your price above the $149,995 bracket.
If you are unsure of your business sale price then seek advice form a professional or book a free appraisal with us by clicking here to book in a time that suits you to have an appraisal completed.