Is Your Business Salable? Is it Profitable?

Employee buyers are no different than other buyers. They want value for their money just like everyone else. If you cannot deliver, then, they should not buy your business.

So what makes a business salable? Let us look at what you are selling:

First, you are selling the tangible assets of your business such as equipment, vehicles, tools, trademarks, intellectual property, etc. Second, you are selling intangible assets such as its reputation, clientele, position in the marketplace, etc. Do any of these things have value? Will it be enough to meet your goals?

The most important thing employee buyers will be looking for is leadership. Can the business continue to run without you? The second thing they will be looking for is its ability to make money. Will they continue to get paid if they buy it from you? Is it profitable? How profitable? Will it continue to be? If the answers are less than stellar, you have a decision to make. Do you try to improve before the sale or do you just sell as-is and accept that the price will be lower?

Almost every sale involves some kind of seller financing. That means that you are not going to get paid for a while. The sale of a business is often a major upset. There is always a risk that the newly sold business will be less profitable immediately following the sale. There is a chance that you may not get paid. Therefore, it is always safer to fix any problems before the sale than after. Fixing problems does not happen overnight, so it is important to make this decision early on and get started doing it.

Many business owners put a great deal of effort into increasing sales and that is great. That is how you generate revenue, but that means very little if the cost of generating that revenue is out of control. With that realization, many business owners then go on a cost cutting rampage and are surprised when the profits aren't materializing. Cost cutting can be a double edged sword. If quality suffers as a result, your reputation might suffer and that can be really difficult to fix.

A better approach is to decide what products or services and what customers are most profitable and then focus on just those. Eliminate anything that is questionable. Once you have decided on the products and customers, you need to adjust your marketing efforts to more precisely hone in on the most valuable customers.

Some buyers, employee buyers definitely, will need outside financing and whoever is going to put up the money is going to want to see some evidence that your efforts are paying off. They are going to want at least three years of financial statements, so you can not wait till the last minute to get started. Lenders are lenders no matter who you sell to and they all have the same requirements.

Exit Planning: The Definitive Guide

Certainly, you can sell your business on your own, but getting some help is almost always required. Somehow, the professionals begin to run the show for you. This book gives you enough information so that you can remain firmly in control of what is going to happen.

Different Buyers, Different Perspectives

As a typical business owner you probably have not thought much about who will take over when you make your exit. It may be tempting to simply target everyone with a pulse, but that would be a mistake. You should know that already because every business plan manual tells you to know who your customers are, what they want and then give them that. Selling your business is no different. So let us take a look at some different potential buyers and what they are looking for.

Employee Buyout

Management buyout, when a small group of key employees or mangers buy the business from the owners, is a very common scenario in the small business space. Some of their primary concerns may be job security or job stability. They want to keep their jobs and they should not change too much. The big change is that you will leave. Suddenly, all the things you used to do will fall on their shoulders. Reality is that they are not prepared for that. You need to think about how you can close that gap and convince them and any other stakeholders that you have done so; that everything is going to be fine.

Family Members

Selling to family members is still a common but shrinking scenario in the small business space. The major challenge is to keep the peace if there are multiple stakeholders. There may also be a preparedness gap to close, perhaps even reluctance to step up and take over. The goal will typically be to provide stable income for them and to preserve a legacy of hard work. Tax considerations are also high on the list when selling to family members. That is mostly your concern, though, not theirs. It is still important to keep focused on what their needs are.

Third-party Buyers

There are several kinds of third-party buyers with different goals and expectations. Some may want to continue your business as is because it fills a gap in their own product or service lineup. Others may simply acquire the assets and integrate it into their own. Some may consider it a long-term investment for passive income. Others may consider it a short-term venture to realize a quick gain. 

Conclusion

All of these different buyers will have different objectives. It is possible that you can find a buyer who is just dying to get a business just like yours the way it is, but that is unlikely. Chances are that there will be gaps between what you have and what they want. Therefore, the process begins with determining what you have. Then figure out who would be most likely to want something like that and, finally, make it irresistible by closing any gaps between the two.

Most of the steps to do that take time so knowing when you want to sell and to whom can make a big difference.

The Intelligent Exit: The Business Owner's Guide To A Winning Strategy For Selling Your Business

Selling your business is likely to be one of the largest transactions you will experience in your life. The stakes are high and a mistake cannot be undone. You only have one chance to get it right. Most other business owners totally ignore preparing for their exit, but you will be well prepared when the time comes.

You will know what you will be doing with your life and how you will live. You will have a salable business so you can unlock the value you have worked so hard to build.