The September 10, 2008, BVWire article titled How low can you go? cited an original article by River’s Edge Alliance Group, LLC, located here.  The article raised the question—what is the floor value for a cash negative business?—and included “the fixed assets of a breakeven or cash negative business do not dictate a ‘basement’ price that a buyer should be willing to pay for the business….the buyer should discount the assets.” Noreen Dornenburg, ASA, PhD (Urish Popeck & Co., LLC, Pittsburgh) replied to the BVWire as follows:

The one obvious exception to the analysis in the article is the situation in which a person is essentially "buying a job."  Many small businesses change hands at asset value because the purchaser values the intangible of independence and is willing to break even on his/her investment in order to be his/her own boss at a reasonable salary, which is already included in the break even analysis as an expense. 

The second rebuttal is that if the assets are priced correctly in an orderly market you can't purchase the assets elsewhere cheaper, except serendipitously at auction.  A good machinery and equipment appraiser, for instance, will place the value at what can be secured in the reasonable and appropriate market, which may indeed have very long wait times, and these supposed "costs" will be included, at least in part, in the market assumption employed in the valuation. 

Finally, if liquidation is the only reasonable option for the business, the sale of the assets as a group (under the business exchange) could save search costs to find the assets, set-up time, etc. for the buyer and may well offset some of the liquidation costs listed in the article.  Admittedly, selling the assets as a group implies that there is a buyer who thinks he/she can get better than break-even in the employment of that asset set.  But that optimism is present in every sale, isn't it?