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The Seven Most Important Things Buyers May Want 

When preparing to sell your business, it’s useful to consider the buyer’s point of view. They usually prefer low risk with high reward when they consider investing in a small business, and they look for good cash flow and solid systems with the potential for further growth.

Buyers will need accurate and complete information to make an informed decision on whether your business is suitable for them. You can help this process by understanding who your potential buyer is and what they may want to know about your business.

In general, there are seven key factors buyers may take into consideration when they’re evaluating a business prospect.

1: Why You’re Selling

This is going to be one of the first questions a prospective buyer asks you. You should have an honest response that doesn’t suggest the need for urgency. Owners commonly sell their businesses for any of the following reasons:

• Retirement or illness.
• To realize capital gain.
• The business future is uncertain.
• They have no-one to take over.
• Their heart isn’t in the business.

It’s important to be honest.

2: The Timing of the Sale

You’ll get the best deal for your business if you plan the sale well ahead of time. This will give you the chance to increase profits and sales, as well as your customer base. All these things make your business more attractive to potential buyers. If they’re aware that you’ve planned the sale well in advance, this is an indicator to them that you’re not being forced to sell in a hurry.

3: Preparation and Information

To be prepared for the most likely questions prospective buyers will ask, make sure you:

• Outline your competitive advantage and unique selling points.
• Demonstrate how you’ve successfully handled the ups and downs, especially a seasonal business.
• Have pertinent information at your fingertip around, leases, customer agreements and intellectual property you own. Note when they expire or require renewing.
• It is clear whether you’d agree to stay with the company on a temporary basis for a smooth transition.
• Know what levels of stock and investment will be required in the foreseeable future.

Buyers will be aware that there’s a risk of customers leaving after you sell. You’ll need to reassure them that your customers are loyal to the business rather than to you.

4: Financial Statements

It’s likely that potential buyers will want to view at least three years of financial statements, including income statements and balance sheets. They’ll be buying into your business’s future profitability, so explain the differences between what the finances are showing now, and what they could be showing in the future.

Gather your financial statements and tax returns dating back three to four years and review them with your accountant. In addition, develop a list of equipment that’s being sold with the business. Then create a list of contacts related to sales transactions and supplies and dig up any relevant paperwork such as your current lease. Create copies of these documents to distribute to financially qualified potential buyers.

5: Sales and Profits

Buyers are always looking for a business with a solid track record of growth in sales and profits. To increase your appeal, focus on improving your sales trends and profit margins. Consider these strategies:

• Optimize marketing efforts to increase visibility and drive sales.
• Identify cost-cutting opportunities, such as purchasing materials at a lower price or switching suppliers for overheads like energy and internet.
• Streamline operations to reduce the need for excessive staff or contractors.
• Encourage your team to implement up-selling and cross-selling techniques and monitor their performance.

It’s important to demonstrate your ability to generate strong sales and maintain a lean, efficient operation.

6: Get an up-to-date Business Valuation

Your business is worth what someone’s prepared to pay for it, and what you’re willing to sell it for. To get an idea of either and to find the right balance, you need to figure out what area of the ballpark you’re playing in.

There are several ways you can go about valuing your business. Which one you choose depends on what kind of business you own, who you’re thinking of selling it to and your reasons for selling it in the first place. Talk to a business broker about the most common methods of valuation and which suits your business best.

7: Finally, Give Your Business a Makeover

In much the same way that you’d spruce up your house before it goes on the market, giving your business a makeover so that it’s presented to its best possible advantage is essential.

This means tidy financial records, optimal levels of staff and inventory, and tightened control over debtors. Fixed assets, like equipment and vehicles, should work well without needing to be replaced soon.

Don’t forget the physical aspects. Update your signage and marketing material, so that you make a good first impression when buyers come to view your business. Your premises should be immaculate and orderly, with friendly staff and lively activity. New signage, repainting, and implementing a general clean desk policy will help the overall impression.

Next Steps

• Be ready to provide a clear and honest reason for selling, which will help build trust with potential buyers.
• Start preparing for the sale well in advance to improve the financial and operational performance of your business, making it more appealing to buyers.
• Gather at least three years of financial statements and other relevant documents, such as contracts and inventory lists, to present a complete picture of your business’ value.
• Work with a business broker to assess the value of your business and set a realistic price based on your business’s financial health and market conditions.

Understanding these seven key factors is essential for a successful sale. Meeting these expectations will not only increase the appeal of your business but also help secure a favorable deal when the time comes to sell.