The rule of thumb in the business brokerage world is that only 20% of companies sell each year. This means that 80% do not. Is your business in the top 20% or bottom 80%?
If you are interested in selling in the middle of an economic crisis, the chances of selling your company are even lower.
There are certain things a business owner can do to make their company sell faster. Or even sell at all. To start, the seller should know what buyers often look for.
What are some of the things buyers look for?
Good quality sales and profits. Increasing and reliable sales means that the company isn’t in trouble and the buyer will have some assurance things will go well after the purchase. The term “quality sales” means the sales are repetitive and can be relied on. It is obvious to say that a company making money is much more attractive than one that is not. After all, that’s one of the main purposes of being in business. A business with long-term positive profits, with the trends in the right direction, will almost always sell for more than one that does not have that characteristic.
Competitive advantages. There should be some sort of obvious operating advantage over the competition. The advantage can be almost anything, a price advantage, superior customer service, geographic location, long term contracts, whatever. Some call these advantages a ‘moat’.
Proven and reliable management. An experienced management team already in place understands the business and is less likely to make mistakes. This means the company will likely to continue being profitable after the sale.
Excellent workforce. Good employees are hard to find and expensive to replace and train. Low employee turnover not only keeps costs down but also retains knowledge of the business inside the company thereby keeping productivity high.
Clean and accurate records. This includes financial statements, legal records, operations documentation and so on. Maintaining these shows attention to detail and the buyer can have confidence that they are buying what they think they are buying. Poor or missing records is always a red-flat to a buyer.
Good facilities. When the physical facilities are appropriate to the size and cost of business operations, buyers will know there will likely not be any unexpected costs coming with the company.
Obviously there are more factors than those listed above that buyers look for. Each business is unique and the factors surrounding it are unique.
And then there is the entire issue of are you prepared to sell your business? Have you performed the needed tax, financial and other personal planning? But that will be a subject for another time.
