Buyers buy a business to make money, since they have no emotional investment in your business, they are buying a box and the output is money.  Everything else is a means to an end.  They are paying a premium as opposed to starting a business from scratch, to step in, take over and hopefully make as much or more than you have.

Few buyers (ignoring strategic and vanity buyers) are looking for a very specific set of characteristics.  Most buyers are looking within broad categories of businesses, such as restaurants, manufacturing, construction, technology, service, distribution, etc.  At first glance, price, cash flow, and location will also be important characteristics..

While buyers are purchasing a business to make money, the lion’s share of evaluation considerations will revolve around money, cash flow, and risk for a continued cash flow. 

Along that theme let’s take a look at what the buyer wants

• Income: Will I make enough to pay off the loan and have enough to live on
  • Buyers of small businesses are often replacing an income and first time buyers may be exiting the corporate world where they had a secured paycheck every two weeks.
• Clear and proven financials
  • A multi-year trend of increasing revenue and a healthy bottom line with a realistic forecast of future earnings
• Business continuity: Will the business continue to make money
  • With the current owner out of the picture, will the business continue to be profitable?
  • How much of the business’s success was because of the owners personality or personal/family relationship with customers and suppliers?
• Threats & Competition
  • Threats can come from a wide variety of sources: new technology, new traffic patterns, regulation or deregulation, changing consumer demands, etc….

The above lists are a starting point as your requirements and goals will be unique as will the buyer’s needs.  Even so, it is a good place to start.  

Preparing for a sale

But what if your business does not look so great from a buyer’s perspective?  What can you do?

There are definite steps you can take to make your business more appealing.  The number one action you can take is to get your financials in order.  Any ambiguity will raise a red flag with prospective buyers.  Be able to converse about line items on your financials. 

Continue to run your business like it will be an income source for the foreseeable future. You will want to hand it over in the best possible condition.  Sales and profits in a downward trend will scare off many a buyer.  

Like selling a house, there is a way to “stage” your business to highlight the positives.  Think about what you would like to see when you walk into a place of business such as how it presents itself physically, what services/products are available, the attitude of the staff, etc. You may also be asked about the challenges you are facing. A Certified Value Builder Advisor can help you prepare for common, and uncommon, questions from buyers. 

If you are 2-5 years away from selling your business, there are many more things that can be done to prepare for the sale and get the most value for your business.  Start with a base line of where you are today and begin crating a path for where you want to be to get the most value for your business.

Working with a business coach to create more value might just be the best investment in your business you can make when it is time to transition to your next adventure.

For a personal, no obligation, consultation in which we can discuss your readiness for sale and outline a plan to get the most value for your business send an email to [email protected]  or call 919-500-1576.