Lots of assets such as cash and accounts receivable, and liabilities are readily valued at cost. Long-term assets such as buildings, land, and equipment often require a professional appraisal. There's a little "wiggle room" here, but not too much. Frequently, both the buyer and the seller obtain appraisals and the resultant amounts are averaged to arrive at the purchase price component. The challenge is always in valuing that goodwill. Don't underestimate that value, and be prepared for the buyer, and his or her team, to underestimate it as much as they think they can.

Topic for Discussion: How do I get the highest price possible for my business without scaring the buyer away?

Answer: Another tough question! Remember, both your broker and a qualified CPA have assisted you in doing a formal valuation of your business. This value is real. Don't back down from it with a "fire sale" mentality. There are other buyers out there; if this one is shopping for a bargain, let him or her go elsewhere. As you negotiate, be mindful of the synergies between your business and the existing business of the buyer. In both Tracy's and Bob's cases, their businesses were synergistic with the businesses of the buyers. In cases like these, the value of the acquisition target is actually greater than the value of the target on a stand alone basis.

Topic for Discussion: What are the advantages to the buyer of buying a business that dovetails seamlessly into his or her current operations?

Answer: There are two ways to grow a business. You can expand your sales with new customers, new products, new sales to existing customers, etc. These are all examples of "organic growth", where the business is nurtured and expands. The second, faster way to grow a business, is by acquisition.

The Art Institute already has a marketing department and a process for recruiting new students. Remember, they told Tracy that they were coming into the San Diego market either way, on their own or through the purchase of her school. Tracy was smart enough to recognize that it would be expensive for them to build their own school, staff it, recruit students for it, etc., all without a local reputation.

And what about Bob? Just how valuable do you think his customer list is to the Foster's Group? Marketing is expensive. Target marketing provides a much bigger value, a much greater potential for return. Bob recognized that he brought this value to Foster's and he capitalized on that recognition. You can do the same but only if you stand firm and recognize both the intrinsic value of your business and the incremental value to the buyer.

You think about it: Who should buy your business and what would if do for them if they did?