The key to making your business more attractive is to position your business in the market in the best possible light in order to attract the best possible buyers. One way of doing that is to consider the deal from the buyer’s point of view. Put on your buyer’s thinking cap and ask yourself: “What am I going to get from this business if I buy it?”
In addition to other matters, there are three fundamental questions that most buyers seek answers to:
- How profitable is the business?
- Once I purchase the business, will it continue being profitable?
- Has the business potential for future growth?
If you are able to come up with good answers to these, you can rest assured that you will have no trouble finding buyers for your business. The history, or past track record, of your business will provide the answer to the first question. If it is indeed a profitable business, you need to be able to provide proof of that by getting your accountants prepare statements showing profit and loss records of a minimum of three years.
Don’t presume that the buyer will accept the figures provided by MYOB, or similar accounting software. They usually don’t.
Business Profitability Questions
Regarding the next question, the prospective buyer will want to be assured that he/she has all the business information that will be required so that the business continues to be successful even after he/she purchases it. You can ensure this by having in place process manuals and other systems for every department of the business.
These usually contain instructions or step-by-step procedures for running the business successfully even in your absence. Past business records can also provide answers to this question. Even though there are no certainties, past records of the business can often be fairly reliable indicators of future prospects. For instance, determining whether the net profit or revenue has been increasing or decreasing in the last three years, and what the contributory factors for those figures are, can tell a prospective buyer a lot about the viability of the business.
The last question is somewhat more difficult to answer, because it largely depends on the buyer’s skill and aptitude to bring about growth in the business. But this can be offset by having a good business plan in place, that is structured well and can be followed easily, and which will provide the roadmap of the future growth of the business. The more comprehensive the business plan, the more effective it will be to convince the buyer of the viability of the business. Once the buyer has evidence in the form of your personal goals and plans for increasing the business, he/she will be instilled with the self-assurance of being able to take it on and continue with the plans.
So, take off your CEO or Director’s hat and exchange it with a buyer’s cap. You could discover that you can improve several aspects of your business, which will result in making it more valuable and attractive for prospective buyers.