The answer is YES if you can successfully answer these four questions the average business buyer wants answered before taking the plunge.
Question 1: If the business is so great why are they selling it?
This is always the first question a potential buyer asks when inquiring about a business that is for sale. There are many reasons you as a business owner may want to sell your business. it can be part of a strategic exit plan to maximize the value of your business. Perhaps, retirement, sickness, or the need to take care of a sick family member creates the need to sell. In addition, for many serial entrepreneurs, it may come down to boredom, which can often be reframed as pursuing new opportunities. Whatever your reason for wanting to sell your business, it’s important that it makes sense to the buyer. If not, then a buyer may become suspicious something about the business is not healthy.
Question 2. Is this business truly profitable?
When looking at your business, buyers are trying to determine if your business is truly profitable. Will produce enough money on day one, to cover expenses, pay off any existing loan debt, and provide an income? This is why it is so critical to have good, clean financials. They must tell a documented story about your business’s cash flow and profits.
Question 3. Can I grow the business and make it more profitable?
Put yourself in the buyers’ shoes. Most buyers have never bought a business before. They are anxious about making this purchase. Being able to articulate to the buyer those things that make your business unique and what types of things could be done to unlock the potential for untapped growth can be the catalyst for getting a good offer. I have heard it said that “People pay for the past but buy for the future”
Question 4. How did you come up with that valuation (Price)?
The fact is businesses will sell if they make good revenue AND they are priced right. Determining the right price is crucial. A poorly priced business, not backed up with solid financials just won’t sell. Determining the right price depends on multiple factors such as business type, size, and the industry it serves. Most businesses under $5 million are priced off of a multiple of what the owner puts in their pocket at the end of the year. This multiple can range anywhere from 1.5 to 4 times its profits. This is often called “Sellers Discretionary Earnings”. Working with a qualified Business Broker will provide the experience and knowledge required to set an appropriate and defensible price based on similar comps and current market conditions.
If you would like a free consultation and opinion of value, please contact me, Bryan Detwiler, at: 480-486-9096 or email me: bryan@tripointbroker.com to schedule an appointment.
