Broker’s Opinion of Value
It is important to distinguish a formal business valuation from business pricing, known as a “broker’s opinion of value” (BOV).
A BOV is a broker’s opinion of what a business is worth, based upon his/her personal analysis, industry expertise, knowledge of local lending, and comparable comparisons. While it is not a formal business valuation, an experienced business broker should be able to deliver an accurate BOV and articulate a realistic Most Probable Sales Price (MPSP) range.
The BOV provides a business seller with realistic expectations on what the business will sell for, given the intended pool of potential buyers, at that given time. For some businesses, the BOV is then used to set and communicate an asking price. For large businesses, an asking price is typically not advertised.
As part of the BOV, the broker may also provide insights on how different deal structuring scenarios could impact the targeted sales price, and the associated tax considerations. Ideally, the broker will function as part of your overall brokerage team which will collectively consider the implications of different deal structures.