When a seller is considering listing their business for sell, one should consider how a buyer is thinking and what they need to know before making an offer. When a seller starts understanding a buyer, selling will become easier. Understand how to price the business and communicate with the buyer.
There are several types of buyers.
Some buyers are looking for a business to fix up and improve operations and marketing. These buyers will operate until all improvements are accomplished. Some will operate these businesses for a long time; others fix up and then sell. Even these buyers do not want a business the shows too much repair and too much risk.
There are buyers that have always wanted to own and operate their own business, tired of working for someone else but have had a dream. One example:” I have always wanted to own a restaurant.”
Some are looking to buy a job and be their own boss.
There are a lot of buyers looking for investments that will provide a new cash flow or grow an existing business, to increase a cash flow, stability and growth.
What is the most important thing I can do to position my business, to look attractive to buyers?
Work on the physical appearance of the business, reduce the risk in the eyes of the buyer. Examples are not having too much of your revenue coming from one or two clients, avoid customer concentration. Second is put your financials in order, organize in a manner that is correct and can be understood. So many businesses do not keep good records. A buyer will be tempted to run if they cannot see where and why the cash flow is being generated.
Answer the question, why would a buyer be interested in buying my business?
Each business has points that will interest a buyer so look at your business and think why someone would become interested in the business. Remember they are not the one working everyday in the business, not tired, needing a change or just burned out. They are coming from a different point a view. Take a look with new eyes and fresh attitude. Try to work with them through their eyes.
Put another way, buyers fear risk, they have not been operating the business and don’t completely understand the business. Take the time to help them understand the cash flow, costumers, products, management and employees.
Again, so many sellers do not keep good records and do not understand why buyers pass up their business that has been making a good living. The buyer has to feel comfortable with the amount of money they will earn from the investment. Without records this is very difficult to accomplish. So put your financials in order and are easily understood. If you really want to sell, take the time and start keeping everything that a buyer will need to understand to make a educated decision. Think of all the questions you would have if you where buying, put their shoes on.
So, assuming you have worked hard to diversify your customer base and have likewise spent some time (and money) getting your financials in order, what should you do next to continue building a buyer ready business?
If you are like most business owners, when you started your company, you were the company. You managed HR, billing, payroll, sales, marketing, advertising, and maybe even mopped the floors.
However, as you have grown, out of necessity you have hired folks and delegated key functions to them. Most of the time busy entrepreneurs have no trouble delegating the areas of operations that they least enjoy. Functions like HR and accounting are usually the first that are passed on to those who are more experienced in these areas.
Remember, when you approach the sale of your company, it is vital to have a mindset of a buyer. What features of your business would a buyer find of interest? Conversely, what areas do you need to improve upon to reduce the perceived risk in your business?
When this approach is taken your business is ready for sale. Good Hunting!