Although obstacles and challenges can certainly arise when selling any business, there are massive rewards to be gained and if you do decide it is time to move onto the next chapter of your life, the results can be life-changing. At Jacob and Jones, our role is to relieve the pressure of selling a company independently but as with anything but this does not mean that by using a broker you waver all responsibility.
Although as your broker we certainly take care of a lot of the heavy lifting, you as the owner still play a significant role in ensuring that the sale of a business is a smooth process. In this article, we take a look at six points which as a business broker, we know need to be in order when attempting to sell any business.
Potential Means Nothing
Would you pay a premium price to buy a business which you knew would need significant investment to get anywhere close to the level of business you are looking for? A potential ‘gold mine’ is of little use to an interested buyer. What they need is hard evidence that the company is running successfully and even grow if possible.
If you are running at a loss or making very marginal profits, is there a reason for this? If a solid explanation cannot be given then you will have a hard time trying to convince an interested party that the road to success will be an easy one. In our experience buyers aren’t looking for a passion project or a business that needs a lot of attention, they are looking to run a healthy company which is already generating healthy profits, so having a business that is in good health is without a doubt the best way to start the journey of selling your business.
Profit Numbers Not Revenue
An experienced business buyer is looking to see profit numbers, not revenue. It is a popular misconception that a buyer can be lured into buying a business on revenue figures alone but this is very, very rarely the case. We know revenue numbers can sound impressive but when it comes down to making a concrete commitment to buying a business, it’s the profit numbers that matter.
Make No False Financial Claims
Being able to reinforce every claim you have made about your company with verifiable proof is extremely important when selling your company. Having concrete evidence which outlines the financial claims you have made readily available is a great sign for an interested party.
Doing everything you can to reassure a potential buyer is a great way to ensure a smooth sales process and doing so from the start will help to establish a respectful and trusted relationship between interested parties and yourself.
The Past is the Past
The past is just that and at the time of sale, what the business has achieved outside of the last twelve months is usually irrelevant to any prospective buyer. As mentioned earlier, buyers are usually disinterested in a business’s past success or what you claim the company’s potential is.
At Jacob and Jones, we know that the majority of buyers usually have little to no interest in fixing up your business. We also know that when looking to exit, business owners who have grown tired of the daily grind can sometimes choose to open less due to their once burning passions having burnt out. Although facing the workday may be a difficult challenge after many years of running a company, closing more often will invariably reduce turnover, something which could be a potentially huge red flag with prospective buyers.
Complete Transparency at All Times
In our experience as a business broker within Scotland, we have worked with enough businesses to no that without a doubt that the truth will always come out so it is imperative that as the seller you are completely transparent from the start.
Selling your business can be a fragile process and any hint of dishonesty can bring the whole deal crashing down. The only way this can be prevented completely is to be completely honest both in terms of not supplying any false information and not stretching the truth by any means.
Be Ready to Have Answers Ready
Although you can expect some of the pressure answering questions to be alleviated when selling through a broker, the decision to buy a business isn’t one many take lightly and is a huge commitment to make. This means that even when selling through a broker you will still have to answer questions as potential buyers run a fine-tooth comb through every aspect of your company.
It is not uncommon for buyers to pressure sellers with the same questions repeatedly in an attempt to unearth any inconsistencies in the information you have supplied. When selling a business, it is important to remember that these practices implemented by potential buyers are not personal and it is paramount that the highest level of respect and professionalism be maintained at all times.
Looking for a business broker to guide you into the successful sale of your business? Get in touch with Jacob and Jones today.