Approaching Your Business Sale from the Buyer’s Perspective

Selling a business is one of the most complex financial transactions you will ever make. You need to do several weeks (or more ideally months) of preparation, making sure you are ready to put your business on the market. The other side of the transaction is stressful as well. Prospective buyers have a lot to absorb when they are looking to purchase a business; it is a major commitment of their time, talent, and treasure, so they want to be sure they are getting into a deal that will reward their hard work. Are You Ready to Buy A CPA Practice?

To gain a better understanding of the mindset of potential buyers, here is a list of common issues they must address as they search for their ideal business:

What about my current job: Most potential buyers are not independently wealthy and looking for a place to park their money. They usually have other jobs; and sometimes, those jobs pay very well with good benefits and a certain level of security. Most likely, the reason they are looking at buying your business is they want the freedom that comes with being their own boss, without having to sacrifice the financial security they need. This means they either have to be comfortable taking a “leap of faith”, or willing to essentially work two full-time jobs at least for a while until they are well established running your business.

How will I obtain financing: As mentioned previously, most buyers will not be paying cash. Hopefully, they will have some available capital to put in, but a large portion of the business will be financed. Commercial financing is not always easy to obtain, especially for someone who has never owned a business before. This means they may be looking for alternative options, such as seller financing. As a seller, you need to consider whether or not you are willing to become a creditor for your buyer. It can make it much easier to close the deal, but it also means you have a vested interest in the future success of the business (in order to get paid).

Will I be able to earn a decent living right away: This ties in partially with the first question. The buyer is going to be looking at his/her current level of income and comparing it to the financial records of your business to decide if it is possible to at least maintain (and hopefully improve) their standard of living. As the seller, you should have your financials in order, so the buyer can easily understand what to expect in the way of business income and profitability.

Is the business trending upward or downward within the industry: Past performance is usually a strong indicator of what a buyer can expect in the future, but trends are just as important. Is your business currently gaining or losing market share? And if you are losing market share, what are you doing, or what needs to be done to turn that around?

Do I have what it takes to move the business to, or keep the business on an upward trajectory: The next question a prospective buyer will have is “do I have the skills to make or keep this business profitable?” At the end of the day, this is really the money question, because the answer will largely determine whether or not the buyer will further pursue this opportunity. They will weigh a number of factors, such as their skillset, ability to manage employees, number of hours they will need to put in, and many others.

A very low percentage of prospective buyers ever actually purchase a business. Statistically, it is roughly only about one out of 15. As the owner and seller, it is helpful to put yourself in the buyer’s shoes, and seriously consider how attractive your business would be. It is also important to cast your net wide and market to the largest possible pool of qualified buyers. This is where working with a business broker can be invaluable. A reputable business intermediary can list your business discreetly in numerous online and offline marketplaces, ensuring that you are in the best possible position for a successful sale.

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