Why Buyers Buy…
So, what makes your business so good that someone would want to buy it from you rather than starting a business of their own?
There are many reasons why someone would buy your business, but the number one reason is to get a return on their investment dollar. When a buyer looks at your business, it will be judged on what level of future profits they “believe” your business can generate for them, the level of “risk” attached to reaching targets and by the attractiveness of the industry in which your business operates.
The first thing a potential buyer will look for is a sound financial history. Remember… a trading business is often an easier and more viable option than starting from scratch. Ideally your business will have recorded a steady increase in profit for the last two to three years, with a similar increase in sales over the same period. If the profits and sales figures are inconsistent or showing a downward trend, or if it’s a relatively new business with a lack of historical data, it may be better for you to delay putting the business on the market until the financial results improve.
However, some buyers will still be open to a business that is relatively young but has overcome the challenges facing a start-up. These include an active and established customer database, robust internal systems, market intelligence, market awareness, brand credibility, an operational framework and (most importantly) cash flow. Another reason people will buy an immature business is financiers are more likely to have preference to lend to a trading business rather than a start up.
Also, buyers of your business will be reassured if they see that your business has been systemised to such an extent that the absence of you (as the working owner) will have almost no affect on its operations. A good starting point is for you to look what the buyer will do for the business and identify other team members who have the potential to take over specific and critical responsibilities.
Finally, industry trends also influence buying decisions. At any given time certain industries or business trends will be in favour. For example, a management rights or motel lease with a contracted tenure with a guaranteed annual return would have greater lending power. Alternatively, a business that manufacture and sell environmentally friendly products would have struggled 10 years ago, but in today’s marketplace there is a great deal of mileage to be made from an environmentally responsible product or service.
So don’t be too quick to think “why would someone buy my business when they can just do it themselves?”. Believe it or not, most people don’t have it in them to start their own business and will willingly pay you for your hard work.
If you want some advice around the saleability of your business, don’t hesitate to send me a message.
Go get em!