The time may come when a business owner wants to move on to new things in life. Before doing so, they need to sell their current company. How can they present the business to potential buyers to generate more interest and increase the likelihood of getting the asking price or more? The following tips are of great help in achieving this goal.
Create a Selling Memo
Every business to be sold needs a memo. This document provides information about the business, such as its location, the competition, how it operates, and more. This is only the beginning of what should be included in this document. Anything that a potential buyer wishes to know should be shared in the selling memo.
Include the selling price in the memo and any terms and conditions. Ensure the selling price is reasonable. Work with cgkbusinesssales.com to come up with a fair price. This becomes even more important if the seller has an online business with no brick-and-mortar locations.
Identify Potential Sellers
Rather than trying to come up with specific individuals or companies that might be interested in acquiring the business, come up with a profile of the anticipated buyer. This might be direct competitors, companies with associated products, or companies looking to expand their territories.
Once this profile has been created, list a few companies or individuals that might express an interest in purchasing the business. Consider why they might wish to acquire it. Next, get to know the decision makers of these companies.
The goal of this step is to let these decision makers learn more about the business and its value. When the business goes up for sale, keep this list available. If an offer is made to purchase the company, reach out to those named on the list to see if they may be interested. This could lead to a bidding contest.
In addition, the profile of potential sellers could help to fine tune the selling memo. The information gathered when creating this profile is of great help in refining the document.
Don’t Take the First Offer
A potential buyer might attempt to isolate the seller to avoid this bidding competition. Don’t allow them to do so. Most people spend time researching different cars and don’t marry their first significant other. Why would they sell their business to the first buyer who puts in an offer?
Spend time meeting with several potential buyers to find the best person to take over the venture. The proprietary deal is rarely in the best interests of the seller, so don’t fall for this tactic.
Add Value to the Business
Continue to find ways to add value to the business even as it is up for sale. The goal is to add cash flow that will continue once the business changes hands. Financial statements must be solid with no window dressing. Ensure potential buyers have an accurate picture of what the business is worth.
A potential buyer will probably walk away from a deal if they cannot understand the financial statements shared by the current owner. They want to know the business will be profitable once they take control. Show them that the business has a sustainable foundation. Any financing for fixed assets should have a reasonable interest rate, and the company needs to have working capital lines. If it doesn’t, the new buyer might be unable to attract more funding.
Don’t share information about the business with anyone. Only share confidential details with those individuals who truly seem interested in purchasing the business. Never assume a person will keep this information private. They could share it with a competitor. Before sharing these details, require the individual who will receive this information to sign a confidentiality or non-disclosure agreement. Not only will this protect the seller, but it will also protect the future owner. They don’t want to purchase the business only to find another potential buyer who has gained sensitive information and is now using this information to compete with them.
Highlight the Business Strengths
Before putting the business up for sale, share information about its successes on popular sites such as LinkedIn. For instance, if the business will be put up for sale next year, issue press releases for major events. When the business lands a big contract or secures a new supplier, share this information with the public. Potential buyers will see these releases and recognize the business is doing well. This simple step may help to attract more buyers when the business is put on the market, so it never hurts to share these wins.
Share Weaknesses of the Company
Be forthcoming with potential buyers. Share information about where there is room for improvement within the business. Potential buyers will do their due diligence and uncover these weaknesses. By sharing them candidly, the seller shows they have nothing to hide.
Furthermore, if a weakness comes up later in the sales process, problems could arise. The seller could end up spending money to correct these weaknesses. It’s best to disclose them, as doing so allows them to be presented in a more favorable light.
Create a Trusted Team
A business owner needs experts to help them navigate the sales process. Choose these individuals carefully. Ensure they have the seller’s best interests at heart rather than their own. If they appear to be looking to pad their own bottom line, move on to someone else.
One thing every seller must keep in mind is a business is purchased rather than sold. The buyer is the one who will be writing the check or securing the financing for the business. The seller is the recipient. However, it falls on the seller to make the business as attractive as possible. Doing so increases the odds of getting the asking price.
Seek advice before taking this step. Most people only sell one or two businesses in their lifetimes, if they sell any at all. Getting advice from trusted individuals, such as an attorney or a business broker, is always a wise move. They help the seller navigate common pitfalls associated with selling a business to help the transaction run smoothly from start to finish.