As a seller, knowing your ultimate objectives when marketing a business will always be necessary, but understanding what buyers want and need is crucial. Knowing who your potential buyers are will increase the odds of obtaining the highest selling price and best terms for your business’s sale. So, what are business buyers looking for specifically? Here are just a few things buyers look for when buying a business.
Understanding the Risks
Every business buyer is concerned with maximizing their returns while keeping their risks at an acceptable level. That’s why buyers evaluate several factors before deciding to invest. Business brokers focus on responding to potential buyers who are exploring their options in the Austin area. If you’re planning to sell your business in Austin, your business broker will review the pros and cons of your business and explain how they will impact prospective buyers. So, what are some specific factors business buyers look for before investing in a business?
Buyers Prefer a Profitable History
Since most investors focus on profits and minimal risks, a history of profits is essential. In addition, buyers prefer a consistent track record, as the business’s track record is a likely indicator of future profits.
If your business isn’t profitable, there are still buyers willing to accept the risks associated with purchasing an organization that’s not currently showing a profit. However, they are very, very rare and generally require some type of incentive to take on that type of challenge.
Is a Quality Management Team in Place?
Business buyers look for investment opportunities where a proven management team is in place and staying after the sale. If you have experienced, motivated management in place, buyers are far more likely to make a better offer for the business.
Growth Potential is Always Important
Investors generally expect to see a potential for growth. In other words, is your business part of an industry that’s expected to see significant expansion in the coming years? Stagnant or declining industry segments see reduced numbers of potential buyers for a business.
At the same time, buyers may still show interest in a business that hasn’t seen significant growth if there is a real potential for future progress. In some cases, renovating operations or modifying the business’ products or services to accommodate new markets may be possible. If your business isn’t currently experiencing growth, work with a business broker to explore options that would increase your odds of attracting buyers.
Complete, Accurate Information is a Must
No buyer wants to encounter issues after buying a business. Sellers must always provide data about any ongoing legal issues, labor difficulties, pending lawsuits, and other problems so buyers invest knowing exactly what problems they’re going to experience, once taking over ownership of the business.
All financial documentation must also be accurate and complete. That’s why business brokers encourage prospective investors to assemble a team of experts to provide support during and after the acquisition. Buyers will be encouraged to have an accountant and attorney to review all documents to determine if issues are present. Sellers should also have qualified accounting and legal professionals assist them in preparing documentation provided to buyers.
Buyers Expect to See the Company’s History
While financial statements and inventory lists allow potential buyers to understand a company’s current status, what about its history? Knowing how and when a business started helps buyers understand why a business is successful. That means sellers want to provide buyers with a narrative outlining the company’s history and how its goals led the company to its current standing.
Highlighting the company’s strengths in that narrative is always important, as buyers need to understand why the company is valuable and should enjoy a bright future. At the same time, buyers also expect an honest explanation of the company’s weaknesses.
Buyers presented with an honest explanation of a company’s weaknesses better understand any challenges they’ll face and provide the direction needed to determine what types of strategies are required to move the company forward. Being realistic at this point creates an environment that reassures the buyer and makes it more likely they’ll present a fair offer.
Not All Buyers Have the Same Expectations
What are business buyers looking for, specifically? There are several categories of business buyers, which means the strategies used during the selling process must differ to attract those buyers. That’s an area business brokers specialize in and why they take time to analyze a specific buyer’s interest in your business.
Novice buyers are common, and they generally don’t have any experience buying or operating a company. That means they may be cautious and need extra attention during the buying process.
Experienced buyers probably currently own, or did own, a business in the past. They understand many of the nuances involved in running a business successfully and will look for documentation that supports any claims a seller makes.
Competitors frequently explore buying businesses to cement their market position. These buyers will be cognizant of industry conditions, suggesting they will be well aware of the growth potential for the business and whether the company being marketed will be an asset for the future.
Turnaround experts are always looking for opportunities to acquire companies experiencing some type of issue. Keep in mind that these buyers look for value, which means they don’t always focus on businesses that are in trouble. They also purchase businesses that are undervalued or have been, for some reason, overlooked by other investors. However, if your business does not have at least twenty million dollars in revenue, there are not likely to be turnaround specialists interested in your business. If that is not the case, it is better to try and turn the business around yourself, before going to market.
Business Brokers Work with Sellers to Achieve Their Goals
If you’re currently considering selling a business, now is the time to contact a business broker for advice. Business brokers can answer the question of what are business buyers looking for, specifically? Austin is experiencing significant growth, which means sellers can expect to obtain better prices for businesses than during the past couple of years.
However, understanding the market conditions is crucial for establishing an asking price for a business and successfully marketing the business to prospective investors. Business brokers are familiar with different types of buyers and what they’re looking for in a business. Remember that obtaining an offer from a buyer is only one step in the sales process. To evaluate your business and determine what today’s buyers are looking for, get expert advice now.
