Understanding how business buyers make their final buying decision is absolutely core to developing a good strategy to get them over the line for a successful sale. Are they actually buying what you’re selling? You may be surprised with the answer…
As a business owner, you may have a very clear idea as to what you’re selling. On the surface you may be selling the fit out, the systems, the location, the lifestyle, the brand or any other number of things. Logically, you’re also of course selling the profits and the turnover. Under the surface you may also be unconsciously selling all your years of hard work building the business.
That’s a lot of stuff to sell in one package.
What a buyer in the current market is actually buying is much simpler…
So what are they buying? You might find yourself jumping straight to higher-level concepts such as ‘independence’ or ‘lifestyle’. Though it’s true that those things may attract them during the early enquiry stages, they are not the things that convert an enquirer into the person who actually buys your business.
The reason: the business research process. Due Diligence, by its very nature is a highly technical, highly involved research process that by its conclusion, has stripped away the more romantic drivers to purchase in a business buyer. This reduces what a buyer is buying into its simplest form:
A business buyer is buying your business’s future profits for which you can demonstrate that, under predictable circumstances, they can and will be sustained for the next 3 to 5 years.
That may sound like a bit of a dry distillation of the business buying mindset, but the reality is that this sentence contains the two main drivers for a buyer purchase:
- That you can adequately predict your future profit (by demonstrating your historical profits through financial documentation).
- That under foreseeable future scenarios, the business’s future profits are not under threat (by demonstrating how internally secure your business is and how stable your industry/market is)
Of course, things like the fit-out, the lifestyle, the location etc. are extremely important, but you could have one of the most wildly attractive and profitable business in the country and not be able to get a single buyer across the line if you can’t demonstrate those two main drivers to purchase.
The point of this blog isn’t to scare you. Not at all. The point of this blog is to remind you to keep this stuff in mind. If you are thinking of selling now or in the future, always remember what the buyer is actually buying, and take steps to cater for that.
Whether you’re selling today or in three years, here’s what you need to do:
- Start preparing your financial documentation:
Financial documents are the basis for any due diligence that a buyer might conduct, and without a solid method of verifying your profits, turnover and financial situation, most serious buyers will simply walk away. To solve this, you could speak to a financial advisor to see what you need, but really; just put yourself in the buyer’s shoes. What would YOU need and want to see if you were making a substantial investment in a business.
- Do what you can to reduce or eliminate risks, doubts and uncertainties in your business.
What are the negative elements of your business that could cause a buyer to perceive a threat to your profits and stop them from proceeding with the sale? Make a list and see what you can reduce or eliminate or make it more saleable in the future.
Do those two things, and you’re on your way to selling your business for its true value.
Zoran would like to offer Chan & Naylor clients a no-obligation business sales consultation today!
For a Free Appraisal contact us on (02) 9817 3331 or visit http://www.xcllusive.com.au/
Zoran Sarabaca is the Owner and Principal of Xcllusive Business Sales and has helped thousands of people over the years buy or sell the business of their dreams.
Xcllusive Business Sales services clients across metropolitan Sydney, Melbourne, Canberra, Central Coast and Regional NSW and are dedicated to helping business owners to find the best successors for their enterprises.
Zoran started Xcllusive in 2004 after not having much success with brokers trying to sell his own business and decided to form an exceptional team to provide a better service in the Business Broking Industry.
Zoran seeks to educate the business owners on their business value and to help them evaluate their position to ensure that they make the best decision on how to exit based upon their current situation.
In 2015 Zoran released his first book: “ How to Sell a Small Business: The seven-step guide to selling your business”. The book is filled with a wealth of knowledge and structured information, which Xcllusive wish to share with business owners.
Zoran is Board Director for the Australian Institute of Business Brokers and serves on the national committee. He is also a Certified AIBB Registered Business Valuer.
Zoran is also an experienced industry speaker and regularly runs FREE events for Business Owners in the Community where we can assist them with getting their business ready for sale now or in the future. Zoran believes business exit and retirement planning is vital for any business owner and Xcllusive seeks to help them “ Sell their Business with Certainty”.