As business brokers, we like to believe that there is a buyer for every business if it makes a profit.
How long it would take to find a buyer and how much they are prepared to pay for it depends entirely on how the business is presented, how the business is marketed and how the business is valued. If you get that right it shouldn’t be a problem selling your business.
There are many ways to determine the value of a business. This is where the expertise of a Business Broker could be crucial. You don’t need to have the perfect business to be able to sell; you need the right strategy to make your business look the most appealing compare to others.
Every business has pros and cons in buying, mostly defined in the risk involved. Some attributes make your business more valuable and more appealing to purchase. When selling your business you should be looking from a purchaser’s point of view, you need to understand the risk buying your business. These risks are often not viewed the same way as the business owner as the business owner has become used to that risk.
A significant risk is when a business has only been trading for a short time (less than 3 year), meaning that the performance hasn’t been tested over time. While other businesses have survived a financial crisis and significant industry changes, your business may be vulnerable to these events without you knowing (despite all research). This could be viewed as an added risk to a purchaser, resulting in a lower offer.
A good business purchase with minimum risk will have at least 1 of the following attributes;
- Skilled or well trained staff
- written supply agreements and/or exclusive distribution rights
- Run under management or minimal input of an owner
- The owner operator earns significantly more than comparable employment in that industry
Now I will make a note for the business owner on the other end of the scale; the perfect business that has all the systems and processes in place, running at 100% of its capability…. There is a risk of buying a business like that. Because it already has all the systems and processes in place and therefore it will probably run at the peak of its performance. Paying a premium could be risky if there are limited possibilities to improve the business.
The beauty of the current market is that there are lots of businesses for sale that are run by the baby-boomer generation. Typically, these businesses are run a little old school and there is lots of room to implement new technologies that will make systems faster and processes easier.
When a potential purchaser is looking to buy your business, they will compare your business with all the other businesses for sale on the market. You will need to stand out and have a significant point of difference. Making small changes before you put your business for sale in the open market can make all the difference in the final sale price.
FREE LINK Northland downloads:
FREE Booklet outlining the sales process: Managing The Sale of Your Business
FREE Booklet outlining other options to an Exit Strategy