To help simplify the selling process, knowing what prospective buyers are looking for is a great place to start. Here are some key factors to consider.
Barriers to entry
Buyers will look for any possible barriers to determine the attractiveness of your business. The barriers could include capital costs, competition, unique products or services, trademarks, intellectual property, or patents. Barriers to entry benefit existing firms because they protect their market share and the ability to generate revenue and profits.
An experienced management team
Another aspect buyers look for is an experienced and motivated management team within the business. A professional team brings stability, expertise, and consistency, giving the buyer more confidence when acquiring a business.
Succinct systems and processes
For many reasons, efficient systems and processes make your business attractive to potential buyers. They provide structure, organization, and efficiency to a company, making it more manageable and less risky for buyers. They also help ensure a smooth transition to maintain business stability and provide a strong foundation for future growth and profits.
Growth potential within the industry
Interested buyers want a clear growth plan to visualize how the business could scale. A growth plan helps them understand if they will make back their investment and continue to make substantial profits in the future. Buyers will also look at ways to grow your business in any untapped markets or other expansion opportunities within the industry.
Market positioning of the business
Knowing where your business stands in the market is a critical factor that buyers consider. Buyers will want to understand your competitive advantage, customers, and pricing power.
Growing revenue and profit
It’s essential to provide your business revenues and profits to show that your business has potential. Buyers specifically look for increasing top-line revenues, bottom-line profitability, and strong cash flow.
Clear financial records
Your financial records will go through careful analysis in the business buying process. Buyers will focus on profit and loss, balance sheets, and cash flow statements. Showing consistently strong financial performance and growth over the years is beneficial.
To further improve buyer confidence, involve an external CPA – read about how we can support you.
A diverse range of external clients
For business buyers, having a diverse range of customers, suppliers, products, services, and industries is essential to mitigating risk. The more varied your coverage, the less reliant you are on a single client or market. This also strengthens your business’s competitive edge by collecting relevant insights from different sources.
When considering selling your business, consider the above factors that buyers assess when evaluating a potential acquisition. It’s essential to remember that buyers seek to determine the value and growth potential of the business.
Take the time to evaluate and assess your business to prepare for your next steps.
Contact us if you’re considering selling your business or have started the process.