Obviously, serious buyers want to carefully look at the financials of a company under consideration and all of the other major aspects of the company. However, there are a few other areas that the serious buyer will investigate that sellers may overlook.

The Industry – The buyer will want to take a serious look at the industry itself, the customers, the suppliers, the competition, etc. This investigation will cover the strengths, weaknesses, threats from competition, and opportunities of the potential acquisition. With the growth of the “big box†retailers, much power has shifted from the manufacturer to the retailer. A manufacturer may want to increase prices, but if Wal-Mart says no, it’s a very powerful no.

Discretionary Costs – Some sellers will reduce their expenses in discretionary areas such as advertising, public relations, research and development, thus making for a higher bottom line. However, these cuts will hurt the future bottom line, and smart buyers will take notice of this.

Obsolete Inventory – This is another area that buyers take a serious look at and that can impact the purchase price. No one wants to pay for inventory that is unusable, antiquated or unsalable.

Wages and Salaries – A company may be paying minimum wages, or offering few or low-cost benefits, a limited retirement program, etc. These cost-saving devices will make the bottom line look good, but employee turnover may create expensive problems later on. If the target company is to be absorbed by another, compensation issues could be critical.

Capital Expenditures – The serious buyer will take a very close look at machinery and equipment to make sure they are up to date and on par with, or superior to, that of the competition. Replacing outdated equipment can modify projections and may affect an offering price.

Cash Flow – Serious buyers will take a long look at the cash flow statements and the areas that affect them. The buyer wants to know that the business will continue to generate positive cash flow after the acquisition (i.e.: after servicing the debt and after paying a reasonable salary to the owner or general manager).

Other areas that sellers overlook, but that the serious buyer does not are: internal controls/systems, financial agreements with lenders, governmental controls, anti-trust issues, legal matters and environmental concerns.

Copyright: Business Brokerage Press, Inc.

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Your brand is a customer’s perception about your business. It determines how they feel about the services and product that you offer. A consistent brand message over time will shape what clients and customers think about you and what you stand for. As a business owner, you need to be able to answer the following important question: why should customers care about you?

Every business owner has to think about the art of branding in order to build a stronger and more robust organization. This should incorporate the art of storytelling and the science of strategy in order to build a dynamic and memorable brand. 

Relationships with Your Clients

In creating a brand, it is vital to remember that brand creation ultimately takes place in the mind of the consumer. Each individual consumer will create their own version of the brand based on his or her perception. 

At the core of the entire process is building trust. The goal, both in the short-term and the long-term, is for customers to feel safe enough that they are confident in you and the products and services that you offer. Central to building that trust is demonstrating, in a clear and coherent fashion, what you are going to deliver and how you are going to deliver it.  

Learning from Branding Gurus

Seth Godin wrote, “Brand is the set of expectations, memories, stories, and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.†With this in mind, you must ask yourself what you are doing to successfully cultivate and promote your brand in the marketplace.

Marty Neumeier is considered by many to be the father of modern branding. Neumeier stated that branding is centered on managing relationships between a company and people over many channels.

Allie Weaver, Co-Founder and Creative Director at Allie Weaver Productions, noted that branding is, “The act of giving people a reason to care about your business and a place to belong.â€Â 

Author Bernadette Jiwa pointed out that great companies all have something in common. Great companies win by mattering. The people who build great companies know what they stand for, and then act on those beliefs in a consistent fashion. Think for a moment about two great companies, Apple and Nike, that have been highly successful in the utilization of modern branding.

Following Your Compass

Building a great brand starts with you. You must understand your vision and be able to answer the question, “Why Me?†Think about why your company exists and matters. How are you working towards keeping a consistent brand promise? In the end, your brand needs to be your compass. If you can understand why customers should choose your business, you’ll be well on your way to utilizing modern branding in a powerful and effective way.

Copyright: Business Brokerage Press, Inc.

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If you’re selling your business and things are looking positive with your buyer, you might be tempted to start resting easy. If you have a signed letter of intent, you might be even more tempted to think that things are pretty settled. However, the fact of the matter is that much can be uncovered during the due diligence process, and that is often when deals start to fall apart. Due diligence is an essential step that protects buyers, and sellers should be well-prepared to have things in good shape far in advance. Let’s take a closer look at some areas where a deal can potentially go awry. 

Products and Equipment 

When the sale involves a business that handles manufacturing, equipment is carefully evaluated during due diligence. Buyers will be thinking about any potential environmental issues that could affect the business. If you’re selling a business and have loose ends with your equipment or facility, this should be handled in advance if possible. 

Buyers will also be looking at the various product lines and inventory. They will be considering how the sales are spread among the product lines. For example, if one product makes up the majority of sales, that can raise red flags in the mind of a buyer. They will also think about supplies and how likely they are to be stable once the business switches hands. 

Buyers will want to look at breakdowns of customers so they can consider the company’s market share and also where the sales are coming from. Similarly, to only having one product, if a business only has one or two key buyers, that can be a source of concern for buyers. 

Intangible Assets

When you are selling a business, your buyers will also be thinking about the assets like intellectual property. Will all trademarks, patents and copyrights be transferred during the sale? If not, it can be a big source of concern for buyers. 

Buyers will also consider the state of the human resources department. Sellers should be aware that buyers will be typically looking for established staff members who are unlikely to leave. This is another area where sellers have the opportunity to prepare in advance to achieve optimal results. 

Sales Issues

Your prospective buyer will want to carefully examine accounts receivable. So if you have bad debt, you might want to sort out these kinds of issues before the due diligence phase. They will also want to have a firm understanding of everything that is included in the sale. Oftentimes during due diligence, a buyer finds out that equipment or patents are not included with the sale, and it quickly derails the deal. 

If you’re selling a business, you’ll want to put yourself in the buyer’s shoes and consider what you would want to see if you were buying a business. Anything that you can do in advance to improve your workforce, equipment, premises, and financial records is highly recommended.  The goal is to have a smooth transition for the buyer, and anything that could stand in the way of that taking place should be analyzed and improved if possible. When you work with a business broker or M&A advisor to sell your business, you will have an expert in your corner to help sort out the details.

Copyright: Business Brokerage Press, Inc.

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There is no underestimating the importance of negotiation when you are buying or selling a business. Let’s take a look at some of the most often used strategies and our recommendations. 

The Direct Approach

One approach in negotiations is what we often refer to as the “take it or leave it†strategy. In this scenario, the buyer makes an offer, and the seller then counters that offer. There is little negotiation work necessary, as both parties are direct and simple about the numbers and terms they propose. The drawback to this approach, however, is that when it doesn’t work, there is little to no recourse. When this “direct approach†offer isn’t accepted by one of the parties, there is little opportunity for flexibility on either side. Therefore, the direct approach can be somewhat of a risk.

Focusing on Influential Details

There are typically certain aspects of a deal where a buyer or seller is unwilling to compromise. Sometimes this aspect isn’t even financial in nature. It could be anything from the desire to move the business to a new site, to employment of a friend or relative. Once the negotiations embrace and include these non-negotiables, it can help expedite a successful deal. 

Splitting the Difference

A common approach that is seen when buying or selling businesses is that one side offers to split the difference. Unlike the direct approach, there is a good deal of flexibility here. When one party shows that they are open to split the difference, it is often seen as a way to keep negotiations going. Another point in favor of this approach is that communication continues. Obviously when one or both sides stop talking, the deal has not been successful. 

Third Party Involvement 

When it comes to finding solutions and resolutions, having a third party involved is tremendously beneficial. When you bring in a business broker or M&A advisor, that individual can then help facilitate the negotiated solutions. This third party is seen as skilled, yet also more of an impartial party. Business brokers and M&A advisors also have many years of experience encouraging buyers and sellers to understand and work with one another. 

Your brokerage professional can help both parties agree to a fair price while handling the aspects of all the small details involved in buying and selling businesses. Negotiations almost always benefit from having a professional involved, as they bring a different, and much needed, perspective to the table. 

Copyright: Business Brokerage Press, Inc.

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No one wants to waste their time and energy trying to sell their business to someone who isn’t actually planning to buy. That’s why it’s so important for you and your business broker or M&A advisor to focus on the most qualified and serious buyers. But how can you really make these kinds of assessments about a buyer’s viability until they sign on the dotted line? Let’s take a look at some signs that will help you figure out your buyer well in advance. 

Do they have a history of ownership?

When someone has owned a business in the past, they have a firm understanding of what is involved. As a result, they are more likely to be a serious buyer. It also means they are more likely to move forward. You will also find that they have the ability to make a substantial down payment and financing options. While they might want you to help them with financing, you should still be looking to ensure they will put their own capital at risk as well. 

Are they seeking information about your cash flow?

If a buyer is serious, it goes without saying that they will want to make sure the business is profitable. They should be asking a lot of questions about not only your cash flow, but also your inventory.  If you have unusable inventory this could be of concern to a buyer. Be sure to disclose this information upfront, as it will likely be discovered in the due diligence process regardless.  

Are they asking about the health of your staff?

Any real buyer would want a dedicated and reliable staff. If your buyer is asking about salaries, it is a good sign that they are serious. After all, if you’re only paying minimum wage, chances are that your staff will not have a lot of staying power. These days, many companies are suffering due to staffing issues, and it’s something that should be front and center in any serious buyer’s mind.

Do they have an interest in the industry?

If your prospective buyer is asking questions about the industry, that is another good sign. After all, who would really want to buy a business without detailed knowledge about the industry they are about to enter? Along the same lines, if you know your buyer has experience in a given industry, it means they are more likely to go through with a purchase. If they lack experience in your industry, do they at least seem passionate about the industry? If they seem like they are not asking probing questions, this might mean they are wasting your time.

Are they asking about capital expenditures?

Your prospective buyer will want to know how money is being spent. You can expect them to make sure that major expenses have already been paid for as they will want to make sure they won’t be caught off guard by large pending purchases.

Do you have professional assistance? 

The bottom line is that the more in-depth questions a person is asking, the more serious they are likely to be. Your business broker’s job is to screen prospective buyers. Years of experience doing so helps them know the warning signs that pop up when buyers profess to be interested, but are not likely to go through with the sale. 

When you are trying to sell your business, it is critical that you focus your time wisely. Your brokerage professional will help ensure that you do not waste time working with people who are just kicking the tires. 

Copyright: Business Brokerage Press, Inc.

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