I ask this question to business owners when they tell me they want to sell their business. It’s usually one of the first questions I ask.
If you don’t know what potential buyers want, how can you possibly position your business to sell for a reasonable amount of money? It’s one of the keys to having a successful transition.
Start by putting yourself in the buyers shoes.
Anytime you think about selling your business you need to start here. If you don’t understand what a buyers motivation would be to buy your business you won’t know how to position your business for a successful exit.
You might even have to put yourself in several buyers’ shoes. Each buyer you talk with will probably have a different motivation for buying your company. I would start a conversation with all buyers by asking them why your company?
You can be sure that a buyer will ask you why you’re selling. Doesn’t it just make sense that you should ask them why they’re buying?
Would you pay someone else what you want for your business?
Almost every business owner I ever work with over values their business. They think their business is worth much more than it really is.
Here’s something I want you to do. I want you to pretend you’re about to buy your business. I want you to take your number and figure out how you would pay for your business if you were a buyer. If you can’t come up with a good and logical reason then your price is just too high.
We all want to get a ridiculous price for our business. It’s why you never put a price on it. Give a buyer your financials and let them make an offer. You might be surprised. And you won’t chase away a buyer by pricing your business too high.
Have you thought about what your recurring revenue model is?
I can promise you this is one of the two things that all buyers want. They want to know that after they buy your business the cash will continue flowing in.
If you don’t have a real recurring revenue model, then you need to demonstrate that your company has systems for creating sales on a regular basis. The more you can document your sales process, the easier it’ll be for you to get over this hurdle.
What have you done to systematize your business?
Whenever I’ve looked at a business I want to know how a new owner is going to run it. Without documented systems in place I’ll likely take a pass.
Your buyer will also. With well-documented systems it’s easy for a new owner to see whether they can run the business, even if some of your key people decide to move on. Without documented systems you can be sure you’ll pay a financial penalty when it comes time to sell your business.
Have you become irrelevant in the day-to-day operations of your business?
This is the second thing all good buyers want in a business they buy. If you’re integral in the running of your business you’re going to scare away an awful lot of buyers. The fact is a new owner will have little interest in having you stick around…..
They might tell you how important you are and how much they want you to stay. That statement is one of the great lies in the business sales game. What all buyers want is your cash flow and systems. They don’t want you.
If you have an experienced buyer, they’ll know that you’re just going to get in the way after your business has been bought. They want you out of the way and the only way that’s going to happen is if you’ve become operationally irrelevant in your business.
If you were going to buy your business what would make you really excited?
This is the key to how you’re going to market your business. Take an honest look at your business and ask yourself what would make you really excited to buy it. If you can’t come up with an answer you’re going to have to spend a lot of time on this issue until you get a great answer.
Many times a successful sale will revolve around the story you have. If you’re story makes others really excited when you tell it, then you’ve positioned your business to sell.
What do you think? If you’re thinking of selling your business are you willing to take action. Let me know what you think in the comments below.