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Disentangling owners’ emotional determinants of the first-offer price for valuating small and medium-sized enterprises

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  • Robin M. Gubela
  • Michael Graffius
  • Birgit Felden
  • Sven Wolff

Abstract

In contrast to internal family succession, changes in ownership to nonfamily successors often mean that owners of small and medium-sized enterprises (SMEs) request a selling price. However, SME owners often subconsciously determine a first-offer price based on personal experiences and emotions with their firms. If the first-offer price deviates from the firm’s earnings value, company transactions likely fail. Research examines few emotional aspects of the first-offer price and lacks a measurement scale to quantify their influence. We develop this scale, the individual price indicator. The scale consolidates the emotional aspects from the literature based on 136 peer-reviewed articles and validates them in two qualitative studies (n = 4, n = 48) and two quantitative studies (n = 48, n = 495). This paper further offers a preliminary test of the new scale. In addition to owners of SMEs, the scale also helps successors, advisors, and other parties reflect on the owner’s rationale for a first-offer price.

Suggested Citation

  • Robin M. Gubela & Michael Graffius & Birgit Felden & Sven Wolff, 2024. "Disentangling owners’ emotional determinants of the first-offer price for valuating small and medium-sized enterprises," Journal of Small Business Management, Taylor & Francis Journals, vol. 62(4), pages 1942-1981, July.
    • Handle: RePEc:taf:ujbmxx:v:62:y:2024:i:4:p:1942-1981
    DOI: 10.1080/00472778.2023.2188548
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