What do prospective buyers want to know when looking for acquisition opportunities? Follow these steps to ensure you’re well placed to sell.
When selling a business, ultimately prospective buyers will only be thinking one thing: Is it worth it? Answering this means breaking the proposition down into several components, but what they’ll really be looking for is a strong business that shows signs of future growth, backed up with a solid track record.
With that in mind, here are the key questions that clients should be prepared for:
What makes your business unique?
How does your business stand out from the crowd? How does it differentiate itself? What does it offer that others don’t?
If you have a specific product, what’s the USP? What niche does it fill?
In other words, your business will need to prove that it has a competitive edge and is well respected. Most buyers want to be excited, so make sure you highlight the interesting things that make the company tick.
How profitable is it?
Profit margins are king, in good times and the bad. This is the biggest indicator as to whether or not your business is a viable purchase, if it’s been well managed and if it’s likely to survive transition.
Obviously, a high profit margin is the most straightforward measure of success. If profit margins are low, you need to be able to show why and how they can be improved with the right management..
Put simply, buyers will want to know their expected income, so accounts have to be audited, verified, open and honest.
What’s the debt?
Prospective buyers need to know how much, if anything, your company owes the bank. If you’re in debt, they’ll want to know the reasons and what the game plan is for paying it back.
Many prospective buyers won’t consider dealing with debt at all, but those who are willing to take it on will need to see assurances that a strategy is in place to get back in the black.
How can the business grow?
Buyers need to know the current state of affairs, but they’ll also want to be wooed by the potential for growth. Will they be able to scale your business model? If not, how much would need to be changed before they can do so?
How can they add value?
A buyer is more likely to be interested if they see a match for their expertise, and can identify areas for improvement.
Not only is this about adding potential value, it’s more about making it personally satisfying, so don’t be shy about seeking out specific buyers who would be a perfect fit. Take time to show you’ve carefully considered the right way forward, and the type of investor well placed to takeover.
Are processes in place for a seamless transition?
Buyers want to avoid hassle, so they need to know what the processes are and if the right management structure is in place to ensure it’s business as usual during transition. As the current owner, are you prepared stick around long enough to ensure the company is in a healthy state?
Buyers will always be on the lookout for nasty surprises, so they’ll want assurances and to pre-empt any potential difficulties.
Why are you selling?
Buyers will always want to know the reasons behind every sale. Are you running away from a problem or, worse, jumping from a sinking ship? If your reason for departure has anything to do with the business itself, they’re likely to view this critically, but it’s important to be open and honest.
Perhaps retirement beckons, perhaps you’re keen to try something new, or perhaps you just realise you’ve taken things as far as you can and you’re ready to pass the baton on. Whatever the reason, be ready to disclose it.
Most buyers will be keen to see the positives, but they’ll always do their homework and business owners should be prepared to answer major questions. The Business Board know exactly how to frame sales, so if you’re putting your business on the market, please contact us online or call 0845 337 3327.