What Buyers Look For When Buying A Business?
1.) Buyers always want to know how long the business has been in operation.
A business with a long track record means there are good reasons for that business to be operating successfully. It will be well known in the area, and people will be used to patronizing the business or using its services. The longer it has been operation, generally, the better the business. It has proven its worth in the market. This is one of the things what buyers look for when buying a business.
2.) How long the present owner has owned the business?
The longer the present owner has been in business, the more likely he or she has been successful. People don’t stay in business if they are not making money.
3.) Buyers always want to know why you are selling your business.
Buyers are looking for valid reason for selling a business. Retirement, health, divorce, serious life changing events and legitimate career changes are good reasons. Short-term ownership, profitability or other business problems are warnings to serious buyers.
4.) What a Buyer needs before they will buy their business?
There are three things a Buyer has to get out the deal, or they won’t buy your business, if there is no: (1) enough money to service the debt they incur in buying the business, (2) enough left over to live, and (3) a decent return on the cash they invest in the business.
5.) What a Buyer prospect think is important?
There are four basis questions that every Buyer asks: (a) if this business is so good, then how come they are selling it? (b) How much money does it make? (c) What’s the upside potential, or is it going to lose market share, when I own it? (4) Where the heck did you get that price? Everything else is secondary.
6.) What makes a Buyer prospect purchase a business?
At the end of the day, the secret to selling a business is the Buyer’s cash-on-cash return on investment. That is, how fast the Buyer can get the cash back they invest in the business.
7.) Why Books and records are important.
Clear and concise financial records are important. How well the company is maintained to a budget and how consistently the budget if followed is very important. There should be two financial programs in place for every business. The internal financial statements that are used to operate the business and the annual tax returns. All items should be explainable and if income re-casting is required, it should be measurable within the statements. If the buyer detects any miss-information credibility is lost and the sale is lost with it. Don’t hide anything from the process because it will only create problems.
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