A business is worth what someone will pay for it. The definition of fair market value is the amount a willing Buyer will pay a willing Seller in the absence of duress.
“All right,” you say, “so it’s worth what someone will pay for it. Thanks a lot. Now can you do me a favor and provide a little bit more guidance?”
Absolutely! It’s good to remember the basic principle above, though, given that it is ultimately true in every situation. In upcoming posts, we’ll provide you a number of guiding valuation principles, but any Buyer can say at any time, “All those principles are fine, but X is what it is worth to me and X is all I’ll pay.”
More on valuation to come!
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David Traversi, Partner, Newport (email@example.com)