What Do Buyers Really Want?
When sellers get ready to put their businesses on the market, they often wonder what buyers want to make their businesses as attractive as possible. The answer to this question can seem mysterious when you are on the other side of the bargaining table. So, what are buyers typically thinking about when deciding whether to purchase a business? It should be no surprise that much of this is tied to earnings and stability.
Guarantees of No Surprises
Sustainable earnings are very attractive to buyers. After all, it allows them to know what to expect. Buyers can then factor in if they can advance the business in a way that would grow faster than the current pace. If not, they at least would have the confidence to know that the business will proceed at the same rate. Of course, no buyer would want to acquire a business only to find that it only had high earnings temporarily due to a one-time contract.
Accuracy of Information
Along the same line of avoiding surprises, buyers will want to verify the information they receive about a business. Anything involving past, present, or future legal issues will be scrutinized along with other problems, such as pending product returns. The due diligence process is when you can expect the buyer to really dig into your business details. You can expect that he or she will often do so with the assistance of an attorney and accountant.
Often, accountants or appraisers add back one-time expenses or non-recurring expenses. Since this process inflates earnings, it can make it difficult for buyers to understand the actual earning potential of a business. Buyers will want to look at the earnings and have proof of expenses that are non-recurring, such as fees for a lawsuit or heavy repairs to a building. Otherwise, those expenses would throw off the true earning potential of the business.
These are just a few critical considerations business buyers make when looking at a potential acquisition. There are numerous other considerations that a buyer will make. It is essential to be prepared to address those questions and potential concerns a buyer may have up front, or they will quickly lose interest and move on to other potential acquisition opportunities. Put yourself in the shoes of a potential buyer and think about the kinds of assurances you would want before buying a business.
Working with a Business Broker or M&A Advisor can be tremendously beneficial in this regard. These professionals have worked with many buyers and easily see things from a buyer’s point of view. They will not only be able to help you get prepared up front when buyers begin looking at your business but quickly identify and point out areas of concern that a potential buyer may have to keep the journey to closing on track.
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