Selling your business can be difficult, especially when it’s served the community or has been in the family for decades. You might be unsure of your company’s true worth or how to find potential a buyer for your business, as well as business brokers. It’s also natural to question whether or not the new owner will treat your business with the respect it deserves.
If you want to retire from running your small business, you need to find the right buyer to safeguard your company’s legacy so that you may move on to other pursuits. In this article, we’ve laid out several steps you can take when finding buyers for your business and the importance of finding a qualified person.
The importance of finding buyers for your business
Some think that the most crucial factor in selling your business is the number of potential buyers your company has. But many argue that quality is more important than quantity for buyers. However, the truth is that both quality and quantity are equally important. Here’s why.
Let’s say you have fifty potential buyers who are interested in buying your business. You may think this means you’ll have no problem selling the business. But this “quantity” of buyers means nothing if they can only afford a $300,000 business, and you’re selling a company worth $1 million. This means you’ll have wasted a lot of time talking to individuals who aren’t serious about buying your firm.
But let’s say you have two interested buyers who both have a million dollars to invest in your manufacturing business. Yes, you have high-quality buyers, but you don’t have enough if neither matches your company’s values and ethics. This is why it’s important to thoroughly vet any potential buyers before accepting their offer.
When selling your business, expect at least ten serious buyers to have a look at it. The more interested, qualified buyers in your firm, the higher the selling price will be. Simply put, the more serious and financially stable purchasers there are, the sooner it will sell, and the higher your final sales price will be.
But how can you attract a large number of high-quality customers? The answer depends on how much you sell your business for and the steps you take to attract buyers who align with your company’s standards. Without taking the proper steps, the sale of your company can quickly go wrong. We’ve created a list of the best tips to follow below.
Do your research
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Researching and reaching out to prospective buyers before selling your business is always beneficial. It’s critical to understand the current market and what buyers are looking for.
Start by investigating the market to see if there is interest in what you intend to sell. Get ready to make some changes based on that feedback. Some of your initial investments could come from those preliminary discussions.
Know what buyers want
Learn to anticipate the questions that potential buyers would ask, as well as the factors that would motivate them to purchase a business. Common purchasing motivations include the following:
- Developing a larger customer base
- Scaling the business
- Innovating their own company
- Fostering their own development
- A faster time to market
- Marketing sector consolidation
- Response to disruption
Businesses should have answers ready for the following common questions:
- How much money does the business make?
- What is the company’s top-line income?
- Are the customers enterprise-level, small and medium-sized businesses, or retail consumers?
- What are the margins of gross profit?
- How often does the business lose and gain customers?
- What are the contracts’ economic values?
- What are the customer satisfaction ratings?
- What is the size of the future market?
Your potential buyers will want to read your information memorandum, which compiles all of the above data. In our next point below, you can learn how to write a winning information memorandum in more detail.
Prepare an information memorandum
A company’s potential buyers expect to receive a summary of the business in a document called an information memorandum — also referred to as a selling memorandum. It highlights all the critical aspects of the business, including:
- The history of the business
- Details about the ownership
- A geographic location of the business
- The company structure and how it operates
- Information on the market and industry
- Details about the company’s products and services
- An overview of assets, financial performance, and employee data
- Information about the customer base
- Why the sale will be a good investment for the buyer
- Reasons for selling the business
- Details about the company’s potential, turnover, trademarks, and patents
- Information about the terms and asking price
The goal of the information memorandum is to increase the company’s valuation and sale price by piquing the interest of potential purchasers. This makes the sale more competitive and demonstrates the company’s strong financial health. It has to be honest, but it also needs to be persuasive and make a solid argument for the business’s potential. The information is highly private and should only be shared with prequalified buyers after they have signed a nondisclosure agreement.
If the company is hoping to attract a large number of possible buyers without disclosing sensitive information just yet, the information memorandum needs to be exceptional. It’s a delicate balancing act that you need to execute flawlessly.
Utilize online tools
An online listing platform is one of the most convenient venues to begin marketing your business for sale. These platforms act as virtual marketplaces for the purchase and sale of companies. Some websites include LinkedIn and AngelList to help you connect with potential buyers.
If you’re a vendor, you might post an ad using a premade template, and customers can discover your company by browsing the website or conducting targeted searches based on parameters like region, industry, price, and more.
If you’re working with a business broker, they may also refer you to these resources.
Listing site resources
You can use any of the following reliable business listing sites to buy or sell a business.
- With over 100,000 closed business transactions and 45,000 active listings, BizBuySell is the leading online marketplace.
- BizQuest was an early pioneer in selling and purchasing businesses online. They make sure to provide a high level of service to their clients.
- If you’re looking to sell your business, BusinessBroker.net can put you in touch with qualified brokers in your area.
Hire a broker
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Hiring an investment banker or business broker may be a fantastic idea if you’ve not strategically prepared to sell your start-up and are currently approaching the most beneficial moment to do so. They can introduce you to the right people, build excitement about the possibility, demonstrate the value, spark competition among potential buyers, oversee the sale’s logistics, and hopefully win you a higher price. This is what you pay them to do. They get rewarded proportionally for finding the right buyer for your business.
How to find a business broker
The International Business Broker Association (IBBA) is a wonderful service for finding a qualified business broker. You can use the IBBA website to look up certified members in your location and field.
Check that your broker has the appropriate Certified Business Intermediary (CBI) certification. If a professional has earned a CBI certification, you know they adhere to high standards of excellence in the field.
Business broker resources
When looking for a business broker, you don’t have to start with an individual broker but rather with a company. To help you get moving, here are some helpful resources you can use:
- Apex Business Advisors has been a part of the company merger and acquisition industry for over 20 years. The tax attorneys, insurance agents, accountants, company sales coaches, and wealth managers they work with are all part of their network of experts.
- There are three main areas that Transworld Business Advisors concentrates on. This includes franchise development, franchise consulting, and business brokerage. In addition, they publish helpful articles on their website for business owners.
- For almost two decades, First Choice Business Brokers has assisted business owners in all stages of the buying or selling process. If you’re a first-time seller, you may find the answers to many of your questions on their website.
- Business brokers from Sunbelt Network operate in every region of the United States, and their well-regarded staff serves both small and midsize enterprises.
- Murphy Business Sales is a business brokerage organization that has been around since 1994 and is now among the largest in North America. Their brokers have extensive experience and typically come from executive backgrounds, either as C-suite executives or business owners.
- VR Business Brokers has been active in the buying and selling of companies for almost four decades. A thorough business-for-sale search tool is available on their site as well.
Network strategically
Relationship building and networking are crucial in making successful strategic acquisitions. Establish your network early on. Sometimes, you’ll be surprised by the people who buy from you.
Business owners should narrow down their list of potential buyers and start making connections to establish communication. You can carry this out face-to-face, over the phone, by email, or over social media like Twitter and Facebook. A great place to start is by reaching out to contacts in your industry who might have connections with potential buyers.
The sale of a business is unlike the purchase or sale of a car or home. Establishing a rapport takes time and effort in most cases. Mentoring can take the form of phone calls, occasional meals, and coffee dates. To make a trade happen while maintaining the best terms, you need to know, like, and trust each other.
Showcase your product or service
It’s safe to assume that any business owner is familiar with praising the strengths and benefits of their company’s products and services. However, presenting these advantages most appealingly to potential purchasers can be more challenging.
When trying to get the greatest value out of a deal, it’s better to focus on what the buyer wants rather than what the seller has to offer.
Both the private equity firm, wanting to swiftly expand earnings before interest, taxes, depreciation, and amortization, and the strategic buyer in urgent need of production capacity will discover value in various elements of the business.
Create a video or presentation for potential buyers to showcase the highlights of your business. Be sure to present your company’s strengths in a way that appeals to the specific buyer you are negotiating with.
Conclusion
Ultimately, targeting is more important than attraction when finding buyers for your business. The best strategy to locate a buyer for your firm that will best match your objectives is to engage in an active and competitive sale process that involves a broad group of possible buyers.
Many owners of small businesses spend up to a year getting ready to sell their business before actively seeking buyers. Using the method above, you can effectively use your time to create a solid foundation to attract quality buyers.