Learn What Attracts Buyers to a Business for Sale
Discover the types of businesses buyers are most interested in, along with the key features that make a business attractive and valuable before you sell. Learn what factors can turn buyers off and make a business less appealing. Use this insight to guide your exit planning and get your business ready for sale. Excerpted from BizBuySell's Guide to Selling Your Business.
Transcript
Understanding what business buyers want. Businesses that gain the highest ratings in all areas sell for the highest prices while those with good to medium conditions sell at lower prices and those with poor conditions likely are not considered as purchase prospects without significant pre-sale improvements.
All buyers seek businesses with strength in the conditions listed in this section.
Strong revenues and profits. When buyers evaluate businesses, money talks first and loudest. They are looking for increasing sales increasing profits and especially strong owner earnings. Owner earnings become the basis of the business valuation, with higher earnings leading to higher business prices.
Strong financial condition. Buyers want to review financial statements that go back at least 3 years.
Clear legal condition. Buyers avoid businesses with legal issues or signals that legal issues lie ahead in the form of lawsuits, contract disputes, or pending legal actions.
Distinct and competitive products and services. Buyers are attracted to businesses with products and services that are in strong demand and that generate steadily increasing revenues and profits.
Location. Buyers seek businesses that are well-positioned geographically and within industries or business sectors that are strong and growing.
Facilities and equipment. Buyers value modern facilities and equipment that is either owned outright by the business or on long-term transferable leases.
Capabilities and processes. Buyers seek businesses with systems in place to achieve financial goals and keep the business running smoothly.
Staffing. Buyers want assurance that the business success does not rely solely on the current owner's management skills and knowledge.
Clientele. Buyers want to see that the business has a loyal clientele, a broad client roster, rather than reliance on a few customers. Signed long-term contracts with major clients and a well-maintained client database.
Brand and reputation. Buyers want verification that the business they are considering is well regarded, is well-known, respected in its market area and business sector and backed by positive customer relations, strong marketing and a positive online presence.
Transferability. Buyers seek assurance that the business can transfer with no obstacles, including transferability of clients, transferability of business capabilities and processes, transferability of business contracts, and transferable long-term leases on facilities and equipment.