The best way to sell your business is to understand what your potential buyer is looking for. Somebody looking to buy a business will have a specific list of points they wish to check so, by covering all of those in advance, you’re sure to clinch the sale.
Remember, buying an existing business is an attractive option for a buyer, as they can hit the ground running without the disadvantages of a start-up. In most cases it is also a much safer option.
Your potential buyer will be looking for a business that has a loyal customer base, regular cash flow and plenty of goodwill associated with the business name.
The chances are that if the buyer is considering your business, they have decided that is the industry they wish to buy into, so that’s a box ticked. But there are probably several businesses for sale within your industry, so why would they choose yours?
The potential buyer will have a list of questions all ready to go. For starters, they will want to know why you are selling. And it’s a fair point. You might think it’s none of their business, but it actually is to some extent.
Obviously you’re not going to tell them you are selling because the business isn’t making any money! But if that’s partly the case, tell them instead that it’s simply not the right business/industry for you.
They will ask you about the general reputation of your business in the area. Try and be as honest as possible, while still making the business sound attractive to the buyer. If you have run your business well and offered great customer service, your business probably enjoys a very good reputation.
Of course, they will want to see your financials, and talk about the profitability of the business, and the long-term forecast for the industry. They may ask if both the nationwide and local market conditions are right for success.
The answers they receive will decide their next move. Hopefully you have given them enough to prompt a move to the next stage – a more thorough investigation into your business, and a sale.
For this next stage your potential buyer will ask for an inventory. The reason for this is that they don’t want to buy thousands of dollars of obsolete stock, or end up with a business with empty shelves.
Equally they will also want a full list of assets. They will want to ensure that when they collect the keys, they are not going to find an empty shop or office! They need to know what is included in the sale to make sure the business can function.
It’s likely they will also want a depreciation schedule from your accountant, so they know how old the current equipment is.
Next they will want to see all the important legal documents: leases if applicable, insurance policies, employment contracts, any legally binding contracts with customers and suppliers and so on. So make sure you have them all ready to go. Any reticence on your part at this stage may be misconstrued as trying to hide something.
Whatever your industry, your potential buyer will want to ensure that you are trading steadily. They are likely to want to see profit and loss statements and copies of sales records, to determine the best selling product lines and opportunities to streamline the types of products being sold.
A potentially sticky subject is debtors and creditors. Longstanding debtors may be a sign of unhappy customers; outstanding creditors may have account restrictions in place or be spreading a bad name about the business due to non-payment of purchases.
Now, the all-important question. Price. Have you priced your business realistically? A realistic figure is one that clinches a sale but also gives you what you need for your next project.
Of course, there are many more things a potential buyer will want to know, like customer demographics, competitors, and information about the location, but that’s something they can research themselves.
So, think more like a buyer than a seller and you’ll clinch your sale in no time!