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Business Valuations for Sellers

What to look for in a buyer

A fairly price business supported by a strong business model and earnings history will receive a great deal of inquiries from prospective buyers.  This is assuming that a pro-active, professional business sales intermediary or investment banker is representing the seller and has responsibly marketed, packaged and advertised the business for sale.  

Getting a lot of attention is a great feeling for the motivated seller, but these feelings can quickly turn sour if prospective buyers are not properly qualified.  In the business brokerage field, some philosophies suggest that for every sold business, one hundred buyers need to be considered.  This law of averages obviously varies for each business, but taking the conservative route is a safe play for all involved.  In order to scale this volume down to 5-10 highly-qualified buyer candidates, consider the following areas of interest: 

Financial Power 

Serious buyers should provide either a personal or business financial statement.  If they are unwilling to do so, move on to the next opportunity.  Be wary of buyer's who make claims of "money is not a problem" or "show me your numbers first".  In most cases, they will be a waste of your time and energy.  Exceptions to this rule would be a buyer who owns company "X" and is seeking expansion or a buyer that has purchased a number of companies in the past 12-18 months. 

Previous Industry Experience

What businesses have they owned in the past or what companies have they previously worked for?  The buyer should provide some type of executive summary or resume to answer these questions.  Look for direct or indirect correlations to the nature of your business so that your company will fall into the right hands.  It can be a negative for a seller to transfer the business to an inexperienced buyer which could result in a business downturn, negative public sentiment, and a black mark against the business you previously owned. 

Expectations

What is the buyer looking for in a business?  What industries or types of companies meet their expectations?  Do they need existing management to remain in place?  What are their return-on-investment expectations?  It is important that some of these basic questions be answered early in the process so that ‘realistic' buyers can be entertained and ‘unrealistic' buyers eliminated. 

Acquisition History

Better understanding the "How", "Why", "When", Where", and "Who" of a buyer's track record can save all parties a great deal of time and resources.  Some of these will be answered in a personal or corporate financial statement.  Others can be answered with references from the buyer as well as their personal thoughts and intentions.  How long have they been looking to purchase a business?  Why is the buyer seeking to make a purchase?  Is geographic location a factor in their decision?  Discover basic factors early-on with buyers to protect yourself and your business. 

References and Track Record

How have other business owners dealt with the buyer?  Have they worked with a business intermediary in the past?  How well have the companies they have acquired performed?  As a business owner and seller, you have to operate with transparency, honesty and integrity.  This ensures buyers are confident in the subject business, its legitimacy and future potential.  The same expectations should be in place for serious, qualified buyers so that the seller is confident in their legitimacy and the future of the business.

To learn more about identifying qualified buyers and the importance of a business valuation, please contact us today or call us at 877-VALU-BIZ.

 


Great Business Valuation with these guys!

"Not only did the valuation experts put together a great package, they clearly explained how they arrived at the fair market value of our business and suggested options for selling the business. Everything exceeded our expectations and everyone involved went above & beyond the call of duty. I highly recommend that any small business owner remotely thinking about selling their business, get a business valuation with these guys."

- George P.
Manufacturing Company
Florida

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