Selling a Business

Entrepreneurs need their own team to navigate the sales process.

3 Things Buyers Look For: What to Expect when Selling a Business

posted by: Brian Caldwell
Nov 4, 2016 9:05:00 AM

When you’re selling a business, it can be all too easy to get tied up in the process. After all, selling a business requires preparation, gathering info for the valuation, listing and working with the buyer through due diligence . Instead of getting bogged down by the to-dos, remember one thing: you cannot sell a business without a buyer. In order to attract the right buyer for your business, it’s important to focus on the key things buyers are looking for. Read on for what to expect when selling a business.

1. Current Market Situation

Woman in suit at start lineSMFirst and foremost, potential buyers will be looking at the current market situation of your business. Buyers looking to purchase an existing business want to know ahead of time if they’ll be participating in a hand-off or a recovery mission.

Every business needs customers, and having a consistent customer base is appealing to potential buyers. It’s worth noting that when you’re looking to sell a business, customers who are loyal to your business, product, or service are extremely valuable.

The other major determining factor of your current market situation is your competition. First, examine your direct competitors, those who provide a comparable product or service. Become clear not only about what sets you apart, but also how the competitive side of your industry functions.

2. Profitability

Although people get into business for any number of reasons, profitability is almost always right at the top. The promise of profitability needs to be a concrete one, that’s supported by proper documentation. For instance, organizing your annual income in terms of seasonality can provide potential sellers with a snapshot of typical profitability against industry trends. It can also lay out the annual lulls and crunch times of your given industry.

Beyond income and trend analysis, potential buyers will be interested in your tax returns. When it comes to budget balancing, recording a profit translates into paying more in taxes. But, when you’re selling a business, few things are as appealing as tax returns reporting a surplus.   

3. Growth Potential

Buyers will also be looking at the growth potential of your business. Some businesses grow, some shrink, and some stay relatively the same size. Determining whether your business is structured for maintenance or growth will depend on your current situation.

Begin by assessing the scalability of your business. Is the organization structured for growth or maintenance? How would the current procedures, processes, and people respond to an organizational growth spurt? Then, look to the physical requirements of growth. Can the organization’s current space accommodate growth, or is space already maximized? Similarly, is there appropriate real estate to promote growth or expansion?

What to Expect when Selling a Business

Preparing your business for sale is a lot more than sticking a “For Sale” sign in the window and waiting for the offers to roll in. Think about your current business as if you were an interested buyer. Then, think about what information would be the most helpful. In order to attract an appropriate buyer, look at your business from a buyer’s perspective.  

 

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