At the end of the day, you’ll only sell your business for what it’s worth to a buyer. If you want to optimize the selling price of your business, what better way to do it than to look at it from the buyer’s perspective and find the buyer who will get the most value from your business? So, what does a buyer look for in a company? It’s not just a question of EBITDA, although that helps. However, there are many other aspects of a company that can attract a buyer. If you understand them, you can make the most of them in your sales strategy. After all, the more a buyer desires your business, the higher the price they’re willing to pay.
So here are some things a buyer looks for in a company:
How well is it going?
does it fit strategically?
Sometimes a company is more valuable to a buyer than to you because it fits strategically with their current operations. This could be for many reasons, including products, services, market share, location, and more. In this case, the buyer may be willing to pay an inflated price to close the deal. A professional consultant is essential in finding potential buyers who could benefit from your business.
Yes, EBITDA is important and increases the valuation of your business.
Even if you look for ways to improve the situation, you need to do so with a long-term perspective. Sudden changes in cash flow will lead the buyer to conduct more in-depth investigations into the underlying reasons. Once there is uncertainty about the long-term sustainability of the figures, the valuation will decline.
Good management.
If the business has been managed by the seller and relies on him to run smoothly, the business will not be of much value to anyone else, especially if he lacks the necessary skills. To increase the value of the business, the owner should make himself redundant so that the business can function without him. This requires establishing a good management structure and training employees with the necessary skills. It is also essential that key employees remain after the sale. This can be achieved through long-term contracts or incentives such as stock bonuses. All these preparations must be made well before the sale.
Large customer base.
The larger the customer base, the more attractive the business will be to the buyer. As a general rule, a single customer should not be responsible for more than 10% of the customs duty. To help offset this disadvantage, long-term contracts can be entered into with larger customers, or the buyer can request a profit guarantee.
Repeat the deal.
If a business has predictable revenue, this is a major draw for a buyer. This could include long-term contracts, annual fees, etc. Make sure you know where your reliable sources of income are.
- Unique products and services.A unique and difficult-to-copy business will acquire greater value. It may simply be that it offers unique products or services, but there are other areas in which a company can be unique. These include its distribution system, ownership, location, licenses, or its market position and reputation. Communicating how your business is unique can help you demonstrate how your business is more valuable than its competitors.
Expansion potential.
Your business may be about to enter a new market or launch a new product, which could increase the value of your business. However, you don’t want to wait to sell. A clear forecast of the impact this will have on the business should be presented with detailed scenarios and a series of variables to demonstrate future potential. Keep in mind, however, that when forecasts don’t materialize during the sales process, this can negatively impact the deal. Another option, which demonstrates to the buyer that you have confidence in the company’s success, is to include an earn-out as part of the agreement.
A leader in the industry.
If your company has a good reputation and is a leader in its industry, buyers will find it attractive. To this end, it’s important to keep a “album” of articles published in newspapers, magazines, or anywhere else where your company is mentioned in the media, including both visual and printed materials that you can present. Ask employees to write about the company and use them to raise your profile in the industry and local community. This helps establish your business as a household name.
Growth plan.
You know your company best, and it’s a great advantage for the buyer to see your thoughts on ways the company can grow. It can also be helpful for them to see your past plans and strategies, how they’ve worked, or any challenges they’ve encountered.
Good accounting.
Clear, well-maintained, and thorough accounts inspire trust. They’re also a great help when conducting due diligence.
In summary
If you want to get the best price for your business, remember to consider it from the buyer’s perspective. Make sure you understand what a buyer is looking for in a company. They’ll want you to be honest about both the positives and negatives when weighing the price. Remember, it’s not just about EBITDA. Research your business’s unique values and how to present them, and find the buyer who can get the most out of your business. A professional consultant can always help with all these issues.
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