There’s no doubt about it… The process of selling a business can be lengthy, frustrating, and overwhelming, especially if you don’t understand how to attract qualified buyers for your business. A sell-worthy company’s value is determined by a compilation of factors such as sales, performance, market outlook, key personnel and management, and net book value.
Value can also be influenced by intangible assets such as community standing, brand image, and good will. If these factors are present when you honestly evaluate things, then you have a company that can be sold.
Being honest with yourself about your true motives for selling will go a long way toward helping you do the right things to attract good buyers.
Once you’ve clarified your goals for selling the business and determined the type of buyer you want, you can put together a plan to attract those kinds of buyers.
1. Establishing the highest value
For both seller and buyer the bottom line is “what is the business really worth?” This is why valuation is such an important part of the selling process. Establishing a reasonable value and supporting that value with the data is a crucial step toward attracting more and better prospects.
For many buyers, the future is a top concern, so this means that not only do you need an established track record of 3 or more years of profitability, but you must be able to illuminate your vision of the future by presenting clear opportunities for both the near-term and long-term growth of your company.
You need to frame this potential in such a way that buyers see your business’s future is promising and which allows him or her to know that they are buying, not only the last couple of years of your company’s performance, but are also getting what the company will do for years to come.
Presenting a well-thought-out strategic plan for capitalizing on your vision of the future is one thing you can do to attract buyers and get them enthusiastic about your company. Another way to assist in establishing your business’s highest value in a buyer’s eyes is to focus on key components such as cash flow, vendor relationships, management and customer base.
- Cash flow
Take time to organize all financial records you will need in order to prove that you produce a stream of solid revenue each and every month. Buyers want to see exactly what is going in and out of a business. Good business records are an essential tool in attracting the kind of buyer you want.
- Vendor relationships
Certain businesses are very dependent on their supply network. An outside vendor who fails to perform might mean a huge financial blow to the company or perhaps cause the loss of a key customer.
If this is the case in your business, be prepared to show the strength of vendor contracts you have in place and to discuss past performance of those vendors. Remember, buyers don’t like surprises. They want to know that critical vendor relationships are strong and will remain intact after the sale.
Some buyers interested in your business will want to bring in their own management team and systems. Others are less hands-on and will want to keep the current experienced management team in place. Either way, having a seasoned, effective management team in place is a valuable asset that you can use to attract buyers.
- Customer base
A company whose bottom line is dependent on only one or two large clients is not as attractive to a potential buyer as a business with repeat customers. Be able to show that your top clients have done business with you for several years and show a track record of increasing sales to those customers.
Creating profiles of key customers is a good way to prove your retention rate to a potential buyer and allay fears they might have that you have too few customers.
Be sure to keep files of good reviews your business has gotten, letters from satisfied customers, and photos and videos of any client events you’ve sponsored. An enthusiastic, happy customer base can considerably raise your company’s value in the eyes of a potential buyer.
2. Find the flaws and polish them smooth
There’s a conversation going on in the head of even the savviest business buyer. Actually, it’s really more like an argument where they are looking for every possible reason to talk themselves out of buying. Remember that human fear of risk? Well, it’s a hard fear to completely quell so you can count on your prospects to run a fine tooth comb over every inch of your business, looking for flaws that might equate to risk.
Your job as seller is to locate the flaws long before they do and do everything possible to correct them. Some things of concern might include: environmental issues and permits, pending lawsuits, product liability, outstanding workers’ compensation claims, patents and intellectual property issues, etc.