When you are looking to sell, always focus on the positive aspects of your business. Many business owners fail to properly make a case for the benefits of their businesses to prospective buyers.  Be sure to make it clear that your business has stability and ample financial health. Let’s take a closer look. 

1. Prepare in Advance 

Preparing paperwork in advance will help to make sure that everything is in proper order and you’re not scrambling at the last moment. When your records are organized and correct, your prospective buyer will be able to truly see the value of your business. Buyers will also like to know that you have robust accounting processes that they can rely on in the future. 

You should also make sure that inventory is in stock and that any necessary upkeep has been done. All of these updates are part of the big picture when it comes to presenting your business in the best light to buyers. 

2. Reveal Your Methods of Operations 

You’ll also want to demonstrate that you have a solid formula for a successful business. Buyers love to see items in place like procedures manuals, as they reveal the routine tasks necessary to run the business. Anything you can provide that will help the buyer understand how to successfully run your business will help them understand its advantages. 

3. Keep Things Consistent

During the sales process, you’ll want to be sure to maintain regular operations. If prospective buyers see any kind of dip in success, this could negatively impact your deal. Selling a business is an all-encompassing process, and it can be next to impossible to handle all the associated tasks while still putting all the necessary time and energy into your business. 

Additionally, you will want to absolutely make sure confidentiality is maintained. A breach of confidentiality, whether to employees or to competitors, can quickly sabotage your deal. There are countless instances where a deal fell through due to a breach in confidentiality. 

4. Get an Outside Perspective

What is the best possible light for your business? Since you’re involved in the day to day running of the business, it is hard to have an outside perspective. Plus having never sold a business before, it can be hard to know what buyers will respond positively to. That is a great reason to work with a business broker or M&A advisor. They have years of experience knowing what attracts and deters buyers. They will help you to emphasize your strengths and minimize your weaknesses. 

While emphasizing the positives, you will of course want to be sure to be transparent about issues affecting your business. Otherwise, the lack of knowledge can come back to haunt you. When it comes to negative factors, your business broker or M&A advisor will work to help buyers to understand how some of these can be turned into positives once they take over the business. Or they can assist you to fix some of those weaknesses before putting your business on the market. 

5. Price Your Business Correctly

It should come as no surprise that if the price you set on your business is too high, you will lose interest from prospective buyers. That is another advantage to working with business brokers or M&A advisors. They will assist you to assign a fair market value to your buyers. When the price is optimal, the strengths of your business will stand out more. While it’s essential not to undervalue your business, you also want to make sure that you don’t overvalue it either. The good news is that brokerage professionals have experience and expertise at listing the optimal price. 

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When it comes to reaching a successful closing, there are four important stages to keep in mind. In this article, we will take a look at the process and what sellers can expect. If you are planning to sell a business, it is also helpful to understand in depth what the stages are from a buyer’s perspective. 

The Letter of Intent (LOI)

The letter of intent is one of the responsibilities that your business broker or M&A advisor will take on to assist you. Your letter of intent should include the price, terms, time frame anticipated as well as other factors, such as the seller’s transition and training. Details such as what is included and what is not included in the deal should always be addressed in this agreement. 

Due Diligence 

The due diligence process is also an essential step. Your business broker or M&A advisor will guide you during due diligence. All important facts and documentation should be evaluated, ranging from tax returns and internal P&Ls to leases, bank statements, and customer/employee lists.  Buyers who do not invest enough time and energy into due diligence can often have serious regrets after the deal has closed. Be sure to take your time with this stage. 

There are other areas of due diligence that should not be overlooked including the very important NDA, financial statements, credit reports and other factors. If you want to have a smooth closing (which clearly you do!), you will want to wisely invest your time in due diligence.

Financing Approval 

Financing approval is considered your lender’s responsibility. However, if you need advice and insights, your business broker or M&A advisor should be able to assist you. You may want to look into local SBA lenders or seller financing. 

Agreement Drafting

The final agreement drafting period must be taken seriously. This is a step where your attorney will be of tremendous assistance. Your written agreement should cover a wide range of aspects including everything from payment terms to assets and liabilities. Both the buyer and seller should know exactly what the arrangement will be. 

When these four stages are followed properly, your deal should close in a timely and effective manner. If you have any concerns or uncertainties about these parts of a closing, be sure to always ask the necessary questions. 

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When you’re putting your business on the market, one of the top considerations is your asking price. Once you have a fair price established, let’s take a closer look at how business brokers and M&A advisors work with their clients to back up that price with details concerning why it is justified. 

Telling the Story

A key aspect of defending your asking price is telling the story of your business. Your brokerage professional will help you go over the details of the story so it is properly conveyed to prospective buyers. Buyers, of course, will want to understand the story behind the business so that they can understand its history and why it is for sale. You will want to feel prepared to interact with prospective buyers and how to discuss details concerning its value. 

Your business broker or M&A advisor will put together written materials about your business. These also help buyers gain clarity on the story of your business and its sales message. 

Seeing Your Buyer’s Perspective

It goes without saying that a big part of coming up with your decision of the asking price is that you want something that sounds not only reasonable but also attractive to buyers. We recommend trying to view the entire transaction from the buyer’s perspective. The buyer must be able to see how they will successfully own and potentially operate the business, as this is essential for fostering a completed deal.

Another consideration is, how will they pay for the business? In many cases, it can tremendously benefit a transaction to offer assistance in the way of seller financing. Seller financing can speed up the process, as you will not be so reliant waiting for the bank loan process, which can drag out for months. 

The Complexities of Your Asking Price 

The process of establishing and then justifying your asking price is not always simple. It is a symphony of moving parts, and it’s important to feel educated and involved in the process. Ultimately justifying the asking price is the launching point of the process, but it is also just the beginning of the journey towards the completion of a successful deal.

Copyright: Business Brokerage Press, Inc.

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Each quarter, the Market Pulse Report issues a report revealing information about market conditions The report is supported by M&A Source and the International Business Brokers Association. The data that is analyzed is based on a comprehensive survey of business brokers and M&A advisors. The report focuses on Main Street businesses (with values up to $2MM) and the lower middle market (values between $2MM and $50MM.) 

The research is conducted and then the report is published each quarter to reflect the state of the industry. In this article, we will look at some of the key takeaways of the report and what it reveals about the path ahead for buyers and sellers.

Tracking the Labor Shortage 

For the second quarter, the report revealed a variety of interesting information. One massive data point from the report is that the labor shortage continues to be a significant variable for business owners. A staggering 92% of report respondents state that the labor shortage has negatively impacted their business with 54% stating that the shortage has had a “very negative impact†and 35% stating that the impact is “somewhat negative.â€

Closing Times

The report further indicated that it is taking about seven months for a business to close. They noted that it takes about six months to a year to sell a well-priced business or a well benchmarked business. The report noted that approximately 60-120 days are spent in the due diligence or execution stage, once the letter of intent has been signed. 

The Strongest Industries

In terms of what kinds of businesses are selling, the report points to restaurants making a solid comeback. It is interesting to note that restaurants valued from less than $500K to $1 million are enjoying a particularly strong rebound. Business services, personal services, construction and manufacturing remain steady. 

In Summary 

The latest Market Pulse Report is pointing in several directions. Currently, three factors are impacting business owners, namely, the labor shortage, inflation, and supply chain issues. Many businesses have had no choice but to give large raises to employees, and others have been able to pass the costs on to consumers and buyers.

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When it comes to selling a business, there is more to it than just relaying the facts. It’s also important to emphasize the story behind the business. Business brokers and M&A advisors are also storytellers, as they must convey to buyers the story behind the business and how it can ultimately be transformed. 

It is through storytelling that humans organize the information they have about the world. In short, storytelling is an exceptional way to learn lessons in life and a great way to frame information about a business to sellers. 

Telling Your Story

Everything begins with the financials, in short, the facts of the business. When a business broker or M&A advisor begins working with a seller, he or she will look to gather those details. Once that information has been gathered, it is possible to begin to create a story. That story can be presented in many ways, including through a confidential business review or confidential information memorandum.

While many, if not most, buyers and sellers may think that when it comes to business, they are cold and methodical like a reptile on the hunt, the truth is more complex. Human emotion always comes into play. It is no accident that well-crafted stories, with their power to motivate and guide, play a role in the art of buying and selling businesses.

Decisions are Guided by Emotion

If we want to make the best decisions, it is important to consider the role of emotions in our decision-making. “In order to have anything like a complete theory of human rationality, we have to understand what role emotion plays in it,†said scientist Herbert Simon who is an American Nobel Laureate. ^[1]

Good stories grab the imagination and enable people to expand their definition of what is and is not possible. When buyers are considering buying a business, it is important that they can picture themselves as being the hero that transforms that business and takes it to a new level. It is a story of evolution and reaching new heights while simultaneously achieving one’s own goals.

It is no accident that so many of today’s mass culture storytelling revolves around sequels. The notion that there is a “storytelling continuum†where a buyer can plug into something that already has a history can be a powerful motivating force. Most epic stories have the hero as part of some sort of continuum. In other words, the hero does not simply appear out of nothingness. It is the hero’s mission to transform the world, in some fashion, for the better.

[1] https://www.forbes.com/sites/forbescoachescouncil/2018/05/09/how-your-emotions-influence-your-decisions/?sh=7bda49da3fda

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