We regularly speak to business owners who believe they have a potential gold mine and expect to command a high selling price based on perceived potential alone. This isn’t how it works. If a business is simply a concept without a proven revenue stream then there isn’t any value in the eyes of the vast majority of potential buyers. The business must be priced correctly as buyers look at many businesses before deciding on a purchase – and they want value for money.

Another common misconception is that buyers are impressed with revenue figures. Sure, they can sound good, but when it comes down to it the only number that matters is the Profit or Cash Surplus to a working owner that a business makes.

If you are going to claim revenue from a specific source, you need to have verifiable proof. It is very difficult to claim cash that you have put in your pocket.

The previous success of a business is largely irrelevant at the time of sale, especially if it has been struggling lately. Buyers are interested in recent performance (usually the last 12 months) and future sustainability and viability, especially if you operate in a dynamic space (such as with websites). We commonly hear sellers talk about how successful their business was in the past. They say “the business has suffered after a recent drop and all it needs is a little work to get it back on track”.

Unfortunately, buyers don’t see it this way. They aren’t interested in fixing and recovering your business, especially if you are expecting them to pay a premium. However, don’t be afraid to show previous years if the business has been growing steadily. Buyers love to see growing revenue and profit figures, especially if you have already made future plans for the business that seem realistic based on past performance.

The first question a buyer usually asks is “How much?”. The second question is “Why are they selling?” This is why a logical explanation is required.

The truth is always going to surface, so be upfront about everything from the beginning. Experienced investors understand that every business is going to have positives and negatives. There is no such thing as a perfect business. If you are honest and transparent from the start there is less risk of a deal going sour because the buyer uncovered something during due diligence that wasn’t accurate, or an instance where the truth was stretched.
Honesty is the best policy in all business transactions and selling any business is no different. Avoid surprises, as surprises will destroy the buyers trust and the buyer will run, not walk, to another opportunity. Never judge a buyer. You never know whom you are dealing with or the buying power they possess. Someone asking what appears to be a simple question could potentially be a buyer that is new to the specific industry and has deep pockets for investing. Experienced buyers will often hammer the seller with questions in an attempt to turn up inconsistencies and red flags.

There are a lot of dreamers & ‘tyre-kickers’ that can waste a lot of time for inexperienced vendors. The only real key to approximately qualifying the purchaser is through good questioning, experience & target-specific marketing. To do this they not only need to understand their own business but have to possess an extensive knowledge of the market they operate in from the purchaser’s perspective.

All Directors/Shareholders will be required to sign a non-competitive clause that they will not compete in the same industry.

Buyers will want to know exactly what they are buying before they make an offer. A complete list of assets is required.

Do not decide that as I am going to sell I will step back. Keep your business humming and make sure it is clean and appealing.

Landlords can be deal killers. Buyers need to know if the lease will be assigned or a new lease needs to be negotiated.