SELLING YOUR BUSINESS RESOURCES
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Book Excerpt: 10 ANSWERS TO HAVE READY FOR BUYERS
When a buyer comes calling, be ready. Following are ten questions most buyers ask, along with advice for preparing your answers.
* Why are you selling? If you don't answer this question, buyers may jump to a wrong conclusion. Probably, you're selling either because your business is strong and growing and this is a great time to offer it to buyers. Or, your business is struggling and it could use the energy and investment of a new owner. Either way figure out your answer and be ready to state it as positively as possible.
* What do you plan to do after the sale? Mainly, buyers want to know if you plan to stick around to help with the ownership transition. Also, they want to know whether you plan to remain actively employed in the same business arena after the sale, in which case they'll probably want to ask you to sign a non-compete agreement.
* How much do you earn from the business? Most business buyers purchase for financial reasons, so understandably they want to know how much your business makes. They'll want to know your seller's discretionary earnings, which is the bottom line of your income statement with add-backs for expenses that reflect owner benefits. They'll also want to see trends for how earnings have gone up or down over recent years.
* Why is your asking price reasonable? Few buyers buy on faith alone. Be ready with an appraisal if your business assets are complicated, or minimally with formal presentations of the value of your tangible and intangible assets.
* How has your business has grown over recent years? Buyers want to see the growth rate of sales and earnings. They also want to see how many customers, staff members, and products you've added, and how those additions impact the bottom line. Also, be ready to show what kinds of physical plant improvements you've made, price increases you've implemented, and any other indicators of strength and momentum.
* How will the business transfer and run successfully without you? This is a big issue, as buyers need to feel certain a pass-off is possible and that business will continue, just fine, after your exit. Be prepared with long-term transferable leases if location is essential to your success. Also have business plans, marketing plans, operations manuals, and employee policy manuals ready to hand over to the new buyer, though not until the deal is done and the sale is certain, as this information is confidential to your business.
* Why will customers will remain loyal? Customers are the lifeblood of your business, so be ready to provide an overview of how many customers or accounts you serve, how long customers stay with your business, percentage of sales from the top three customers, customer purchase patterns, and other facts that assure the buyer that customers are loyal to your business.
* What does the future of your business look like? Avoid offering a rosy projection that a buyer can later say misrepresented conditions, but by all means provide an accurate assessment of how you see a positive future. To back your words with facts, be ready with growth projections based on recent growth history, market and industry growth projections, and future business plans that fuel success.
* What business risks might your business face? Mosts risks fall into the categories of low or declining earnings, lack of key staff, unprofessional operations, high competition, dependency on only a few customers, a declining industry or market area, or a problematic site lease. If your business faces any of these risks, work to overcome them prior to a sale or, minimally, be prepared to present them along with a plan for how they can be overcome
* What payment terms will you consider? Most sellers settle for a sizable down payment and an ironclad promissory note to cover the balance of the price. In fact, sellers who insist on an all-cash-at-closing deal usually end up with lower sale prices, simply because it can be difficult for buyers to come up with cash out-of-pocket or from third-party lenders.
Read the Guide to Selling Your Small Business, published by BizBuySell, the Internet's most active marketplace for businesses and franchises for sale.guide, online and for free, at www.bizbuysell.com. Or go to Amazon to purchase a print copy. Either way count on the book to guide you through the process of deciding to sell, preparing your business for sale, finding buyers, negotiating the deal, and transferring to a new owner.