Selling your Business? Here’s what business buyers are looking for!

When preparing to sell your business, you want to make it as attractive to the potential purchaser as possible in order to achieve the best sale price…

That’s why it is a good idea to consider things from the buyer’s point of view. In other words, what would you look for in a business if you were the buyer?

If you want to significantly increase the interest in your business, here’s a list of 7 factors buyers find most attractive when evaluating a business:

1. Profitability

Right out of the gate, prospective buyers will want to know if your business is profitable. If your company’s revenue and profits are in a permanent downward spiral or saddled with debts, don’t expect buyers to jump in and buy. Instead focus on building your company to a point where you can demonstrate strong and sustainable EBITDA margins, which lowers the associated risk for business buyers and makes your business more attractive.

1. A Well-Established Business and Brand

If you have an established business and a strong brand this is more appealing to potential buyers because there is less risk, since the business already comes with its own existing customers, suppliers, contacts, good will and immediate cash flow. A reliable income and strong reputation to capitalise and build on for buyers will benefit you during the negotiation process and generate more interest when you decide to sell.

1. Potential for Future Growth

Prospective buyers want to see proof of your company’s growth or potential for future growth. Buyers will look for a multi-year trend of increasing revenue and a realistic forecast of continued revenue growth going forward. Evidence-based forecasts can help buyers assess opportunities, but future profits and growth remain uncertain. That is why before you sell, you should work towards a consistent top-line growth.

1. Genuine Reason for Sale

Early on prospective buyers will want to know “why you are selling?”. It is important to be honest with your response as the buyer will find out down the line and it builds a good rapport to be upfront during the negotiation process. Some of the most common reasons owners sell their business is due to retirement, overworked, partnership disputes and sometimes illness or death.

1. Barriers to Entry

Prospective buyers will want to know what differentiates your business from its competitors and whether you have a strong market position as a result. Barriers to entry can be created though intellectual property, such as trademarks, economies of scale, customer loyalty, supplier or distribution agreements. The more barriers to entry you can create, the more valuable and attractive it is to potential buyers.

1. Stable infrastructure

A stable business infrastructure ensures the proper coordination of all processes, human resources and other operational tools necessary to ensure manageable and profitable growth. This reassures the potential buyer that not only is your business organised and efficient, but that the business can maintain its profitability and stability after you have left the company.

1. Loyal Staff, Customers and Suppliers

Prospective buyers look for an established customer, supplier and experienced staff base that will remain with the business after the sale. The greater your ability to demonstrate a large and loyal base, the more appealing your company will be to buyers who are looking for stability and assurance.

Ultimately the key to selling your business is through planning and preparation. You need to assess the attractiveness of your business from the buyer’s point of view early on, define areas that need improvement and revisit your plan regularly. This may improve sale readiness and buyer interest, but does not guarantee a higher valuation or a completed sale.