To help you get your business ready for selling, you need to understand what serious buyers want. Let’s look at what these types of buyers really want.
- An Interest In The Industry
A prospective buyer will want to have an understanding of your industry. A serious buyer will want to understand the industry as a whole. They will want to understand your existing customers and your prospective customers. They will want to understand the strengths and weaknesses of your business. Another major factor for prospective buyers is if there are threats from competition.
- Seeking Knowledge About Discretionary Costs
Buyers will take a long look at discretionary costs. Often times, sellers will look to reduce their expenses in a range of discretionary areas such as advertising, research and development, and public relations. Sellers do this to help make a business appear more attractive to a buyer. A savvy prospective buyer will notice reduction in discretionary expenses.
- Inquiries About Wages and Salaries
Another area that receives attention from buyers is wages and salaries. Employee turnover is likely to be high if your business is paying minimum wage or offers a limited retirement program. This may cause buyers to think that employee stability is low, which can potentially disrupt business.
- Questions About Cash Flow and Inventory
No serious buyer will overlook the issue of cash flow. Any buyer will want to know that the business they are considering buying will continue to generate profits both now and in the future.
Another area that a serious buyer will not ignore is inventory. A prospective buyer will factor into their decision-making process any large amounts of antiquated, unsalable or unusable inventory. This inventory will be discovered during due diligence, so it is best to disclose it.
- Seeking Capital Expenditure Details
Buyers will examine capital expenditures. Serious buyers will carefully evaluate machinery and equipment to ensure that there will be no expensive surprises.
These are definitely not the only areas that buyers will investigate. Other areas such as financial agreements, environmental concerns and government control will be examined in depth. Invest some time to think about your business from the perspective of a buyer. This will help you discover potential problems that you can then secure viable workarounds. EBIT Associates can help you successfully anticipate the needs of buyers.