If you have a cannabis business and you think that it is special enough to get a quick sale, listen up. Everyone, though, thinks that their business is special and so that is a given. It is similar to a homeowner that thinks his or her home is special when placed on the market for sale. They want to achieve the best value because of updates that may have been done. It is the same way with a cannabis business, especially if you have put a lot of hard work into making it profitable over the years. You are not holding a bad position, if you think that way. As a business owner, you should always take pride in building your business to the point it is through hard work and every buyer would appreciate this. While you prepare to sell your cannabis business, there are some things you need to know. It is very important that you understand the process of evaluating your cannabis business and giving it a realistic price tag. Let’s take a look at the valuation process.
The Valuation Process
You should definitely choose a realistic valuation range, but what do you call realistic? An investment banking firm may be the solution to securing your valuation range. In other words, find a good investment banking firm or broker to represent the sale of your cannabis business. Make sure that the broker or firm understands all there is to know about the cannabis industry and related business along with the customer base and inventory. The firm or broker must be experienced in selling business and must understand the normal practices needed to get the deal done. When you are looking for valuations and your investment firm or broker uses values for a business such as a pharmaceutical testing laboratory, this is the sign that the firm or broker does not know how to proceed wisely. Instead, the broker or firm should be looking at cannabis testing laboratories instead to find the most accurate valuation. One mistake like this could cost you millions of dollars. The pharmaceutical and cannabis testing laboratories have different earning potentials and so it is not the best thing to use one or the other to find the value. Most investment banking firms and brokers have access to databases that can reveal the closest valuation to your cannabis business in relation to similar businesses that have been sold recently.
The Market Strength
There are certain factors that have to be taken into account; one of which is the market strength at the time when the cannabis business is being sold. You have to make sure that the sub-sector inside the cannabis market is also strong and this includes the current and future potential. That will directly impact the valuation of your cannabis business. Other affecting factors include the cost of materials, labor cost, interest rates, fuel and utility costs and even pension and healthcare program costs; believe it or not.
The management team also has to be strong. When someone is buying a cannabis business, this is likely what they will look for too. In other words, the buyer is probably wants to maintain a management team that is strong and already knows the business and the future potential. A strong management team will increase the value of the cannabis business. If the management team is planning to leave the company as soon as it is sold, this will devalue the business and so if you can keep everyone intact for the buyer, this will be a plus is selling your cannabis business quickly.