Imagine you are going to take out a loan out from a bank and all your personal assets are going to be used as collateral and you will be putting a large sum of money down to buy a business.
Would you buy just any business or would you be particular about the business you bought?
Truth be known,buyers are particular and they are more particular today than ever before.
When reviewing a business, today’s buyers are looking for stable, solid, investment. They are quick to walk away if the information and numbers are not to their liking.
So what do buyer’s want?
This is not an easy answer. Buyer’s requirements change based on the market. Depending on the interest rates, availability of financing as well as the economic mood, the buyer may be more or less tolerant of risk.
Interestingly, often business owners think,”My business is a gold mine for the right buyer!”
Seller will often try to convince a buyer that with a little marketing you could make a fortune with this business.
The question of course that a buyer asks is: “Well, Mr. Business Owner, why haven’t you made that effort”?
Today’s buyers are not willing to pay the business’s potential. Business owners must take those steps themselves, which not only will increase their revenues and profits in the short-term, but will greatly improve the value of their business.
What buyers really want is reduced risk.
They want assurance that the business they buy will produce the cashflow they expect, not a projection.
So, here is a short list of what buyer’s look for:
- A well-run, stable business.
- Clean books and accurate tax returns.
- A well-marketed business.
- Loyal customers.
- High customer diversity.
- Contracts (if applicable).
- Reasonable seller financing.
- Structed business for growth.
- Unique businesses with sustainable models.
When a business owner considers selling their business, the 3-4 years before selling should be the best 3-4 years the company has ever had. Sadly, it is often the opposite. The owner waits until the market shifts or until they just can’t do it any more and the books like the business is dying. This is not the type of business that yields the highest selling price.
Before business owners considering selling their business, they should evaluate the opportunities for improvement and make those improvements so that a new buyer only sees a well-run business and is willing to offer a higher price.