You’ve invested time, money, and countless other resources into your business, and it is understandable that you wouldn’t want to hand the business off to just anyone. You need to be sure that your buyer is the right fit, not only someone who is willing to pay the best price, but someone that has a vision for the future of the business. Finding the perfect buyer for your business might seem like a difficult task, but there are some things you can do now to ensure the process runs smoothly and the outcome is one that both you and your buyer will be happy with. Consider these steps to finding the perfect buyers for your business.
Prepare Your Business for Sale
To find the best buyer for your business, you need to put your business in the best position to sell. Most potential buyers are looking to purchase successful, well-managed businesses. Before you list your business for sale, be sure to tie up any loose ends the business may have. Negotiate contracts, repair work vehicles or equipment, and fill all vacant positions with well-qualified employees. First impressions are also important, so take the time to organize your workshop or replace worn furniture in the waiting room. These small details do not go unnoticed by interested buyers, and they have the added benefit of increasing the value of the business as well.
In addition to preparing the tangible aspects of your business for sale, you’ll also need to prepare your financials. To start, buyers will usually want to see profit and loss statements from the last three to five years, tax returns, and balance sheets. Have key industry numbers and future projections on hand, and be prepared to explain the value your business adds to the market. Clear and organized financials give buyers the overall impression that the business is well managed, an asset to those looking to make a smooth transition.
Work With a Business Broker/ Intermediary
Running a successful business takes expertise, therefore, you are most likely an expert in your industry. You understand the value of working with industry experts, and selling your business should be no different. The process to sell a business can be time-consuming. An experienced business broker/intermediary will take the tasks of valuing your business and finding a buyer off your hands, so you can continue to focus on what you do best—running a successful business.
Finding the right valuation for your business can be a challenging task. Though every business is different, business broker/intermediaries draw from a wealth of knowledge and experience to determine the best value for your business. They know what buyers in each industry are looking for, and how to market your business to meet those needs. They are also able to leverage their network of contacts to find and vet potential buyers, all without you needing to take time away from running your business. While each sale is unique, working with a business broker will streamline and often shorten the process of selling your business. Whether you plan to sell a small manufacturer or a large, multi-location business operation, an intermediary will work to ensure you have the best buyer for your business.
Set the Right Price
After years of hard work growing a business, it’s reasonable that a business owner would want the highest valuation possible. As previously mentioned, it can often be a difficult balancing act to find the perfect sales price. While you don’t want potential buyers to get sticker shock and lose interest immediately, you also don’t want to miss out on profit if you price your business too low.
Several factors go into determining the sales value of your business. Sales, earnings, and market outlook all play an important role, but so do intangible assets like the business reputation and brand loyalty. Buyers place value on potential for future growth, so a strong and diverse customer base is likely to greatly increase the value of the business. Other transferable assets are also considered. Do you own a patent or trademark? Is real estate a part of the deal? Be sure to clearly state everything you intend to transfer to the new owner. This will ensure you get the best possible purchase price for your business.
Qualify the Buyers
Even when you are actively looking to sell, the thought of turning over your business to someone else may be difficult to think about. There are many reasons people look to purchase a business, but they are generally divided into two groups. The first group, strategic buyers, typically own one or more businesses already. They may even be a competitor. They are looking to see how your business will work with their existing portfolio. Strategic buyers tend to have the resources and experience to purchase a business. Financial buyers, on the other hand, have money to invest, and their main goal is to turn a large profit. Financial buyers may not always have industry expertise, but they are motivated buyers that often will pay the most for the business.
Your business broker will pre-screen potential buyers. They will want to know that a buyer is financially qualified to purchase your business, from where they are getting financing to whether they’ve had bankruptcies in the past. They will be looking at other factors as well, including work experience, industry knowledge, and any additional transferable skills they may have. Intermediaries often run background checks, as well. Once your buyer has been screened by the business broker, you can rest assured that he or she has been fully vetted and found qualified to purchase your business.
Be Patient
The best time to sell your business is when the business is going well. One of the reasons this is true is because you have more time to find the right buyer. Business owners often wait to sell their businesses until they have no other options, whether because of financial problems, health, or other factors. This puts the owner in the position to take the first, not the best, offer on their business. Placing your business for sale while things are going great not only ensures the best valuation of your business, it also gives you the time and freedom to wait for the perfect buyer.
The average length of time to sell a business is around six to nine months. Factors like industry trends and the economy can have a great effect on how long a business is on the market. Intermediaries typically shorten the process by finding qualified buyers and using their expertise to negotiate and close deals effectively and efficiently. While you may be tempted to take any offer that comes to you, it is best to be patient and wait for the perfect buyer for your business.
The process to find the perfect buyer for your business can seem daunting, but there are things you can do to make the process easier. Begin by preparing your business to sell. Whether you need to focus on hiring highly qualified employees or getting your financials in order, ensure all loose ends are tied before you list your business for sale. Next, hire an intermediary who will determine the best valuation of your business and match you with the perfect buyer. Finally, be patient. Trust your business broker to find the right buyer for your business, and work to make the transition as smooth as possible.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
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