The “Help Me Understand” Question
Discover the best way to determine what a seller thinks the business is worth in this short video by Jonathan Jay, founder of The Dealmaker’s Academy. In it, Jonathan tells you:
- The exact wording of the question to ask a seller to determine the value they place on the business
- Why sellers will more often than not struggle to support their original valuation as a result of being asked this question
Prefer to read this? Here’s the transcript:
Hi, this is Jonathan Jay from the Dealmaker’s Academy.
With top tips on buying and on selling businesses. Now here’s a great tip.
When you’re talking to a seller about money, about valuation, about what they think the business is worth, here is the question that you ask, and you ask this question word for word like I’m going to say it to you now.
The question is, help me understand how you reached that valuation? Help me understand how you reached that valuation.
Then you just shut up and you listen and you take notes, and when people have to explain a valuation, the number that they thought of, because that was their retirement figure, or the number that just popped into their head, or a nice round number where they thought that was going to be a fantastic payday, if they sold the company for that amount, when they have to analyse it, see you don’t analyse it.
When they have to analyse it and break it down, they really struggle, and that’s when you’re writing down, say okay so we realise that you’re saying that the assets is worth this and the goodwill is this, and you’re saying the website’s worth this, this machinery’s worth this, and this office is worth this, whatever it might be, help me understand how you reached that valuation.
It’s a great tip.
For more tips like this, hit the subscribe button, And I’ll see you on the next video.