Don’t ignore the buyer

Russell Veitch, of KWS (www.keywealthsolutions.co.uk), looks at what people commonly look for when buying a business and how understanding your buyer can help to make your company a more attractive prospect.

For the business owners currently sweating blood and tears to make their venture a success, the thought of later selling up and walking away from the company might seem far off. Yet, at some point in the future you may want to see a return on all of your hard work, enabling you to take a step back, explore new challenges, or move away from a changing market.

The decision to sell your business is not one that can be taken overnight. Careful planning is essential if you are going to reap the rewards of all your hard work. Yet, all too often when it comes to selling their business, people get caught up in profit and turnover and forget who their potential buyers are and what they might be looking for.

Your business is only worth what someone is willing to pay for it, so it’s vital that you understand your buyer’s point of view.

Put yourself in their shoes

If you were looking to buy a company what would you want or expect? What would grab your attention and what would put you off? You should consider these questions if you want to make the most out of your business’ sale.

Risky Business

One of the key things a buyer will assess is risk. There is no point paying a large sum of money for a company if the business is likely to lose a significant proportion of its customers, suppliers or staff following a sale.

The infrastructure of the business needs to be able to withstand its sale, so you have to make sure that your company and its culture are transferable and compatible with the types of company that might buy you.

For example, does your business have contracts or regular orders? If you have customers who buy from you on a regular basis or long standing agreements with suppliers, consider turning the relationship into a contractual one.

Not only will this add stability to your company, but it will also give you something tangible that can be passed on to the buyer. Contracts give the buyer more confidence than ongoing business and this added security could add significantly to your company’s value.

Preparation is also key when it comes to your staff. Keep them in the loop, let them know your plans for the company and they will be more likely to stay on after its sale.

Make it easy

The purpose of buying a business is often a ‘short cut’, a quicker alternative to the years of work and effort that go into building a business from scratch. Therefore the more confidence that you can build in potential buyers and the easier you can make the process, the more attractive your company will become.

Leave something for the buyer

Sell your business before reaching the top. You do not want to try and squeeze every last sale out of your business before you sell, only then to find it difficult to find a buyer. Buyers will be looking for a return on their investment and will seek out companies that have the potential to grow. You will get far more value out of an exciting prospect than a spent force so be sure to sell the future, not the past.

A buyer’s agenda

Run your business as if it could be sold at any time, working to what you might see as a buyer’s agenda and not your own. You will need to plan well in advance to generate the most possible value out of your venture.

Whenever you make a decision about your business, consider what impact it might have on its value or its ability to attract buyers above all else. Thinking about the buyer from the start means that you will be much better prepared when the time comes to make the sale.

Business structure

Will your business be able to function without you? If your business is dependant on your input it is not going to be an attractive prospect for potential buyers. Take a step back. Gradually reduce the input you have on the day-to-day running of the company, delegating tasks to other members of staff.

Setting up a board, or a clearly defined hierarchal structure could help you to take this step back and give the business a structure beyond yourself. Your aim should be to make your involvement redundant by the time it comes to sell your business.

This will not only help your business’ prospects, but also your own, as you will be able to dedicate more time to working on and not in your company. It is also important to keep things simple. Buyers like businesses where they can quickly grasp the processes that are in place and understand the way things work.

First impressions count

Never underestimate the importance of your business’ appearance. You wouldn’t sell your house without giving it a spruce up first and the same should be true of your business.

You need to make a positive impression, giving any potential buyer the feeling that that your company is a well run and closely managed venture. An untidy appearance could leave them wondering about the state of the rest of the company; should they expect your finances to be in the same shape as your offices? Like selling a house, giving your office a tidy and a lick of paint can make all the difference.

Selling your business is not a step that can be taken lightly and will have financial and emotional consequences on your life, long after the sale has been completed. The time you take to prepare for this process will be well spent and looking at your company from a buyer’s perspective will have a significant impact on the price you will receive for your business and the time it takes to complete its sale.