Misspelled ‘Intellectual Property’ valued at $130,000. When it comes to selling or buying businesses, there’s the concept of goodwill—the surplus above the value the purchaser pays. Then, there’s the concept of Intellectual Property (yes, it’s not ’interlectual’), which can be extremely valuable if you’re dealing with something like the recipe for Coca-Cola or the code that underpins Google’s search engine.
But… when it comes to strata management businesses in Australia?
‘Interlectual (sic) Property‘?
$130,000?
Who’s actually paying that? Why would anyone spend that amount? What are you supposedly buying?
Is there a value in your intangible assets in your strata management business?
If you are selling the business or company and have been going on for a while, sure, there’s probably some built-up repository of knowledge, templates, and processes. But are they worth $130,000? Hardly. Do they hold some value? Yes, but honestly, not a substantial amount.
So, where does the real value lie, and how does a broker or buyer attribute it?
Is it in the brand, logo, and goodwill? Potentially, but probably not for a large majority of SME strata management businesses. Instead, the tangible by-product of your brand, goodwill, and relationships should be an actual pipeline of potential new clients. A skilled business broker (ideally a specialised Strata Business Broker) could— and should—help to attribute actual $ values to your pipeline.
Let me be blunt in putting my view this way:
Clueless generalist brokers have no business trying to sell strata management businesses. We’ve seen far too many vendors get burned by wrong advice, lack of genuine buyers or offers at the tail-end, and haphazard, nonsensical ’valuations’ or asking prices.
If you’re buying or considering the purchase of a strata management business and something doesn’t quite add up, feel free to drop us a line with your questions.
