Great! I believe every owner should be thinking about selling their business RIGHT NOW! Why? Because the things that make the business more attractive to buyers also make the business more enjoyable for the owner. Additionally, the process to prepare your business for sale may take a month or two. It may take two or three years. Because it’s not unlikely for circumstances beyond your control to dictate when you sell, and understanding of the preparation process and how long it may take is critical. Finally, to sell your business, you’re going to need a buyer. If that’s the case, let’s talk about buyers. Here are three questions every buyer asks before buying a business.
Why are they selling?
The most common, first question buyers ask is this: “Why are they selling?” The buyer is trying to determine if you’re looking for a life-change or have determined that bad things are coming and it’s time to get out. Do you have a good reason for selling that the buyer can appreciate or are you attempting to cut your losses?
What do I get when I buy your business?
The next question buyers are seeking to answer is this: “What do I get when I buy your business?” This is important because we’re not selling a house, we’re not selling a car. We’re selling a business. If it was a house or a car, we could drive by going 40 MPH and make a reasonable guess as to what it’s worth. Businesses aren’t like that. I’ve seen very rough looking, rusty office/warehouses where the owner had made seven-figures for a decade. I’ve seen beautiful offices and restaurants that were losing money month after month. Can you present to a buyer what he gets by buying your business in a way that he can see it and believe it? If not, he will not be buying your business.
How did the seller come up with the price?
Once the buyer is comfortable with your reason for selling and has an understanding of the benefits of buying your business, we get to the money question: “How did the seller come up with the price?” There better be a logical explanation for pricing! We can spend hours meeting together but if we can’t justify the price, it’s all been a waste of time. After meeting with hundreds of buyers, I can tell you the most common response after meeting with a seller and considering a business for purchase is this, “They’re great people. I think they’ve got an awesome business. BUT, I’m just not going to be able to make an offer anywhere close to what they’re asking for the business.” Why is that? Quite simply, the value perceived by the buyer doesn’t match up with the seller’s. Obviously, we can just keep lowering the price until a buyer finally says “Yes.” But, it could be that some simple changes to how the business is operated and presented could dramatically increase how the buyer values the business.
CBankston has a systematic process for analyzing how businesses will be valued by buyers. What we do with that information is determined by the seller’s urgency to sell. If the seller has been instructed by his Cardiologist to sell the business or make funeral arrangements, we’re out of time to make significant changes to the business. The seller who is planning to exit in two to five years has the opportunity to make small changes that could have an incredible impact on how his business is valued.
Is there any reason you wouldn’t want to have a conversation regarding the process for selling your business? Contact us today to set up a free consultation.