12 Oct Why buyers won’t buy your business
By Shane Fox | This article first appeared on Hunter Headline
You have worked hard to grow your business and now you want to start the process of selling it to focus on your next challenge (even if that is retirement)!
Unfortunately, many business owners fail to plan for the sale of their business, meaning their expectations don’t end up matching reality.
When selling your business, it’s not about waking up one day and deciding to sell. It takes planning and preparation – and to be honest the process can be overwhelming for the uninitiated.
Remember, you don’t get to sell your business twice!
Below I’ve provided four essential elements that every business owner should be aware of well before selling their business.
1. The lack of financial information.
Buyers, their accountants and financiers want and need accurate, consistent information. This would be ideally over three years with full financials and should be supported by BAS statements and/or tax returns. This could mean preparing a business for sale three years earlier and before the exit.
A business is an investment – in most cases the best returning investment on offer- and often deemed high risk, so buyers are much more diligent and careful. They will be willing to pay more for a business that offers solid information, as it provides confidence, resulting in a fair offer, terms and conditions and, not to mention, you may sell your business much quicker.
2. Perceived risk/s.
Buyers will generally see the new potential venture as a risk. More often than not, they will evaluate the owner’s role and position in the overall business as well as several critical areas including relationships, systems and processes, agreements with suppliers or third parties, market trends, seasonality, excessive stock holding and debtors, legislation, compliance and competition (just to name a few).
Whilst there are many potential risks and it may not be easy to mitigate all these perceived risks, you can at least be prepared on how you can respond and provide comfort and confidence to the buyer. Remember, they don’t know what you know about your business!
3. Strengths and opportunities.
Buyers are looking for a business that has solid foundations – everything from the history, culture and team, brand and market position, solid financials, systems and processes to the quality location/lease/rent.
They also want to see potential that can be realised. Thus, ensure you can present what is in it for them. If they can sense the obvious path to growth, it makes a huge difference.
Otherwise, you run the risk of a buyer perceiving the opportunity as capitalised on already and this may lead to them looking for other opportunities for capital growth.
4. The selling process.
You may have a great business but the sale could be lost before you even start. Buyers can search for a business in many different places, many of which you may not know about.
You need to be where the buyers are searching to even get an enquiry and then you have to have a diligent process to manage buyers and keep them interested. Gaining their trust, their confidence and building a relationship will get the deal done.
At Merchant Business Brokers, we offer a superior proven service with processes designed to protect business owners’ confidentiality whilst managing buyer’s expectations right through the sale process.
Keeping a buyer interested from enquiry to sale takes patience, time, knowledge and skill. At the end of the day, we want all business owners to have an enjoyable exit from their business, as stress-free as possible, with the best financial outcome achieved.
If you would like some help to sell your business or are interested in purchasing a business, please feel free to get in touch with us.