“Why should anything be wrong?” you ask.  Because few people are willing to pay top dollar for a small business that’s perfect.  That may sound strange, but think about it.  The people who buy a small business have more than a financial interest in mind.  They also have personal motivations—just as you did when you became an owner.  These buyers will pay more when they find a business that meets their personal motivations, one that offers them opportunity to “do their thing.”

For example, the strong points on which you built your business may have been printing and management skill.  But you'll be the first to admit that stronger marketing skills are needed to take your business to the next level.  The buyer comes along and sees the same thing.  And he’s the right buyer because he is strong in marketing.  There’s synergy here because “the right things are wrong.”  The buyer can buy your business. Put his own stamp on it and make it his business. 

Reduce the business’s dependency on you.  Transfer many of your tasks to subordinates, so the new owner sees that he can “manage” without having to “do.”

Maintain good financial records.  If you have not done so until now, whip your records into shape.  Buyers and bankers get a boost in confidence when they see professionally prepared financial statements.  (My Business Valuation Software is a big help here.)

In addition, prepare information on: 

•  Customer concentrations: A heavy dependency on a single customer decreases the value of the business in proportion to perceived risk.  Change that.

•  Margin Maintenance: Show how you manage costs and measure profitability.

• Credible Projections: Support with evidence your expectation for stable and increasing profits, so the buyer can see the opportunity in the business.

• Stability of Tenancy: Secure leases, to eliminate relocation worries.

• Risk Perception: Anticipate situations that might raise a perception of risk.

Tip # 4.   Know the Different Types of Buyer and What Each Type Will Pay

To attract the right buyer (different buyers pay different prices), you have to recognize the four types.

• Strategic acquirer: These pay the highest prices, usually in cash.  They buy for strategic reasons such as economies of scale and market share.  But typically they look for companies with sales of $20 million, and expect management to stay on. 

•  Sophisticated or corporate acquirer: With backgrounds in corporate America, these buyers examine a business closely.  Size is less important than opportunity.  These buyers, maybe a group, may review a hundred businesses before selecting one.

• Financial buyer: These are the most plentiful.  They will not pay prices based upon projections.  So they will not pay top dollar.  This group expects terms or the ability to finance the buy.  They are primarily interested in purchasing a job.  Small businesses attract this type when they do not position themselves for the sale.

•  Industry buyer: These can be the best or the worst.  The best, when they have a strategic reason to buy.  Otherwise, watch out!  Most industry buyers look only to selected assets to determine value; they do not pay for goodwill or future prospects.  They pay significantly less then a sophisticated or corporate buyer. 

This information is important because, as with anything else, only the right buyer pays the right price.   The book shows you how to identify the best buyer for your business ~ how they think ~ what turns them on or off ~ how to position your business so that the right buyer will recognize your business as an exciting opportunity.

Selling Your Business: from A to Z

I can discuss here only a few of the many valuable, concrete ideas you need to know to properly value, sell, or merge your business.  Here are some of the others. 

"The right tools can make you an expert"

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If you’d like some help right now in determining your position on selling/merging take the One Minute Quiz for Business Owners Only.)

More tips on selling your business