At first blush, selling a business for a lot more than a proper valuation sounds like a really great thing for the seller, perhaps bad for the buyer, and neutral for the broker. But is this all true?
Lets look at the seller first. The seller may very well earn more than market and have great pride in the sale and continuing success of the business he nurtured through years of ownership. However, quite another story could play out.
If the buyer is not experienced and has a slow learning process, there could be a dip in profits and ability to pay the seller-financed loan could be challenged. You likely have heard about a seller that did not get paid, had to take the business back, taking it back found the business run into the ground.
This failure can also be discouraging for the seller, watching their pride and joy fall into disrepair.
Sellers often have bigger than reality or bigger than reasonable ideas about their pride and joy. Can the higher than reasonable price be found in some cases? Yes.
Can the seller that realizes a reasonable price be disappointed by non-payment or deflation of the business? Yes but it is less likely.
Note: Listing the business at too high a price will likely reduce the number of interested individuals and perhaps put off those that are.
The seller who finances should ensure there is a personal guaranty of the financing, a strong enough net worth of the buyer, and specifics as to what happens in the case of non payment in the closing documents.