When preparing to sell your business, it is really important to understand the needs, wants, fears and aspirations of the potential buyer.
Many of the fears discussed in this article are based on entrepreneurs who are looking to buy themselves a job or a business as an investment. Strategic buyers and professional investors often already have industry experience and know how your business can add value to theirs or how they can add value to your business and generate a good return on their investment.
Selling is professionally helping people to buy -- and being able to address these fears will go a long way in your ability to successfully sell your business.
1. What is your real motive for selling?
The pursuit of new opportunities, boredom and the “business needs new blood” will set off alarm bells. The potential buyer will start to worry that your driving reason behind selling your business is that the rewards you are reaping are not commensurate with your efforts. You may be working longer and harder than you say you do.
2. Is the business really as profitable as you say it is?
Up-to-date, clean financials with fewer adjustments will always give a buyer better peace of mind. The good old “nudge, nudge, wink, wink, you know what I mean, you know what I mean” line does not work well when trying to sell your business. Every dollar that you take out of your business and cannot account for, can have an impact on the value of your business.
3. Will I get financed?
People want things they can't afford. A good qualifying process is crucial -- as well as being able to show a prospective buyer how your business can fund itself and service the loans if required. Another important thing to consider is that the buyer is going to need to use your financial information to be able to get access to funding. In other words, they going to have their accountant -- and the bank -- look at the figures.
4. Are the relationships with you?
The relationships you have with customers, suppliers and staff are personal. When you leave, so could they. Potential buyers may also be concerned that your suppliers may not give them the same deals they gave you.
5. Do I have the necessary skills?
If running your business requires highly specialized and industry specific skills and knowledge, it may significantly limit the number of potential buyers -- unless you have a committed team, and the buyer is confident that they will remain with the business. Too often business owners shy away from dealing with this fear, but it should really be addressed early. You don't want these fears to come up late in the negotiations, after you have invested a lot of time into the process, and have the buyer walk away.
6. What have I missed?
Having the right information available when a buyer requests additional information is crucial to increasing their confidence in your business.
7. Am I going to pay too much?
Excellent negotiation skills are crucial in the sale of your business. Both parties need to see that there is a fair exchange of value. Dealing with money often becomes an emotional issue. There is even a saying -- "as emotion goes up, intelligence goes down." It is absolutely crucial that you have a good team of people around you who are familiar with the process and are able to support and help you.
Selling or buying a business can be a significant lifetime event for many people. A business that is well prepared for sale -- and a sales process that is well managed -- can make this process much quicker, easier and better for both parties.