Posted 11-13-2014 11:34 am by
When it comes to selling your business, the ability to market your business the right way can mean the difference between getting top dollars for your business and scaring potential buyers away.
The truth is – most buyers of small businesses are first-time business buyers, and their decision to purchase or not purchase a business is greatly influenced by how the deal is packaged. Today, I will discuss the essential elements of packaging a business for sale, so you can use them as part of your interview criteria when you talk to business brokers.
Principle 1: No surprises for the buyers. Many business brokers send information to potential buyers piece by piece. For instance, if the buyers want to see the lease, the broker sends them the lease. If the buyer requests the equipment list, the broker sends it to them. The problem with this approach is that it creates doubt in the buyers’ minds, because the buyers feel they need to constantly fish for more information. The right approach, in my opinion, is to send everything to the potential buyer in one fell swoop to avoid any surprises. I call this the Marketing Packet, which is often times 50 to 200 pages long. Having a Marketing Packet makes your business look extremely professional, and increases the desirability of your business to potential buyers.
Principle 2: Show the owner’s true income. Many business owners try to make the net income on their books as low as possible in order to reduce the amount of taxes they pay. While having a low net income may reduce your tax liability, it scares away potential buyers when they see how little your net income is. An excellent business broker is able to recast, or essentially reconstruct, your financials to show the true income of the owner. Not all business brokers recast your financials, and you should make sure the broker you utilize does this. When buyers see the true income of the owner rather than just what your books show, they are much more willing to pay a higher price for your business.
Principle 3: Ensure confidentiality. Selling a business is very different from selling a house. You cannot stick a For Sale sign in front of your business. Often times, the owner does not want the employees or vendors to know that the business is for sale. Marketing your business while maintaining confidentiality takes a lot of care and skill. A good business broker will break your marketing into stages. The first stage involves describing an attractive business, but being vague enough that potential buyers cannot figure out which business it is. After the buyer expresses interest and signs a confidentiality agreement, the broker will then send the buyer the entire marketing packet.
In order to position your business to sell for its maximum potential, you have to market it correctly. Interview several business brokers, and make sure the broker you hire will do the right job for you.
Aaron Muller has sold over 120 companies and facilitated over 40 SBA loans for his clients. Contact Aaron at (425) 766-3940 to inquire about selling your business.
