Every business owner has a big dream to sell their business, achieve financial freedom, and live life on their terms. But many don’t know where to start or what to do. Recent studies show that business owners have a concept of the value of their business, but less than half of those have obtained an independent valuation. How do we know our value corresponds with the market value to a buyer?
Selling our business is a lot like selling a home, except the business values are usually much higher. We must think like a buyer. Everyone knows that kitchens and bathrooms sell houses. Location is also critical. For buyers with school-age children, school districts are important. For elderly buyers, master bedrooms on the main floor are important so they don’t have to climb stairs. There are many other factors. Typically, to maximize the value, we don’t sell our house ourselves. We hire a professional agent, they come up with a listing price based on comparable sales, and run a process.
In the same way, when selling our business, it’s important to think like a buyer. This means understanding what buyers are looking for in a business and how we can position our business to be attractive to potential buyers.
- Identify our ideal buyer. Who is our ideal buyer? What are their goals? Pain points? Knowing who we’re selling to, we can tailor our marketing materials to appeal to them.
- Prepare our business for sale. This means cleaning up our financials, updating our marketing materials, and getting our business in top shape. Many business owners don’t know where to start or what to do in these areas. So, hiring a professional to help you is critical.
- Hire a business broker or M&A advisor. It’s best to have an independent advisor to handle the marketing of our business, finding potential buyers, and negotiate deal points.
Here are some additional tips for thinking like a buyer when you sell your business:
- Be realistic about your asking price. Consider the value of the business based on the cash flow of the business or comparable sales of businesses like yours.
- Be prepared to answer tough questions. Buyers will want to know about the business’s financial performance, its competitive landscape, and its growth prospects.
- Be transparent about the business challenges. Don’t sugarcoat the problems that the business faces. Buyers appreciate honesty.
- Be patient. Selling a business can take time. Don’t expect to find a buyer overnight.
By following these tips, you can increase the chances of selling your businesses for a fair price and to a buyer who is a good fit for the company.