What Buyers Are Looking For When Purchasing A Company

A seller needs to know what buyers are looking for when purchasing a company. As part of due diligence, buyers will usually employ attorneys and accountants. The attorneys look at legal issues and review or draft documents. Accounts will check the numbers. A buyer may also bring in other professionals to look at the business’ operations. As a seller, knowing what the buyer may be checking can be a big help. A business broker is a good person to help a seller look at these matters.

Here are some examples of things a buyer will be checking:

 

What Buyers Are Looking For With Finances
  • Checking the gross margins for the past few years might indicate a lack of control, price erosion or several other deficiencies.
  • Is the business late in paying its bills?
  • Are the company’s annual financials prepared on a timely basis? Does the company have monthly financial statements?
  • Has the company used all of its bank credit lines?

 

What Buyers Are Looking For With Management
  • Has there been a lot of turnover in management in the past few years?
  • Is the business owner constantly interrupted by demands that require immediate attention? This could be an indication of a business in crisis.
  • Do the employees take pride in what they do?

 

What Buyers Are Looking For With Marketing
  • Is the company introducing new products or services?
  • Is the company experiencing loss of market share? The real measure is unit sales, not dollar sales.

 

What Buyers Are Looking For With Manufacturing
  • Does the company have too many suppliers?
  • What is the turnover of inventory?
  • Is the business in a stagnant market? Can it shift gears quickly to make changes or enter new markets?

 

When business owners consider selling, they should consider the areas listed above and make whatever changes are appropriate. It makes good business sense to review them, but also to resolve as many of the issues as possible.

 

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