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It's not uncommon that two business owners
simultaneously looking to sell in the same area will undergo completely
different experiences. One might find the selling process to go quickly
and smoothly, with the business commanding a respectable price. At the
same time, the other might struggle as the business sits on the market
for many months, eventually selling for much less than they had hoped.
What accounts for these two very different experiences? The first seller
most likely had a much better understanding of how to make their
business marketable to prospective buyers.
In many ways, selling a business isn't too different
from selling a house. In both cases there are certain factors that can
have a significant impact on whether or not the property is marketable
to buyers, such as physical condition, the quality of a for sale listing
and financial details. Ultimately, though, selling a business is a
unique situation that presents unique challenges. If business owners
enter into the selling process without sufficient knowledge and
preparation, they could find that their businesses sell for less and
stay on the market much longer than they'd like.
To make a business as marketable as possible, business sellers should pay close attention to the following considerations:
Create a Strong Listing
While the physical condition of a business is a critical element in its marketability, how a seller presents the establishment in a for sale listing can be just as important. Sellers who create strong, carefully thought out listings almost always have the most success selling their businesses. The top goal should be to provide as many details as possible without revealing the exact identity of the business (assuming you'd like to keep that confidential, as most sellers do). Sellers who take this approach are usually leaps and bounds ahead of the competition from the start, and are likely to pull in higher prices and sell their business in much less time.
The first step is to determine where you will list your
business for sale. Traditional local newspaper listings can target a
niche audience, but online listings typically offer much wider exposure.
The marketing strategies and overall functionality of business for sale
websites differ greatly from site to site, so it's crucial to do your
homework before deciding where to list.
When it comes to the content of the listing, the key
is to know which details to include and which to leave out. Buyers
gravitate most toward detailed listings, but there's a fine line between
being forthcoming with useful information and breaching
confidentiality. It's important not to include information that could
let competitors and employees know the business is on the market.
If possible, it's typically beneficial to include
financial information such as revenue and cash flow, as this is the most
common criteria potential buyers use to search for businesses. By
including these numbers in a listing, a seller is likely to get many
more views and find that buyers are much more willing to transition from
casually interested to seriously interested. The willingness to offer
this information signals to potential buyers that the existing owner is
confident in the business and that the purchase would be a good
investment.
In addition, business sellers can make their
listings more appealing to prospective buyers by including geographic
information such as state and county. Most buyers search at the city
level, so including that information in your listing will likely result
in a large number of views. However, it's generally not a good idea to
reveal the exact identity or location of the business to avoid
confidentiality issues.
Other elements of great listings include creative
headlines that emphasize the top selling points of a business,
attractive photos of areas in the establishment that don't reveal its
specific identity, clear contact information (it's best to set up a
nondescript phone number and e-mail address specifically for buyer
inquiries), and careful attention to spelling and grammar.
Get the Books in Order
Business sellers who fail to accurately account for
all business revenue before going to market can face major problems once
they begin dealing with potential buyers. Still, in an effort to save
on taxes many business owners don't report all their income and then
tell prospects they have a greater amount of annual revenue than what's
in the books. Not only does this make buyers question the seller's
integrity, it puts them in the difficult position of having to decide
whether or not to believe the supposed revenue number is accurate.
To help make their businesses more marketable,
owners thinking of selling should begin keeping complete, detailed
financial books at least three years prior to a sale so that all income
is accounted for and can be properly evaluated by the buyer. This
includes removing all unnecessary expenses from the books, such as a
"company car" that isn't actually used for business purposes. A higher
tax bill might follow, but it will also result in a higher sale price
once a transaction takes place.
Renovate and Upgrade Well in Advance
A great for sale listing will get solid buyers
interested, but a well kept, well run and physically appealing business
will seal the deal. Once a prospective business buyer has communicated
extensively with a seller and wants to go forward toward a transaction,
he or she will want to view the business in person. This isn't the time
for the seller to scramble and make sure the business is presentable.
Instead, sellers should work to get their businesses looking and running
as great as possible well before listing the business for sale.
It can be tempting to put off essential renovations
until the last minute. Business for sale transactions typically take
time, so there might not seem to be any rush. The truth is, though, that
it's impossible to predict exactly when a sale might happen or exactly
how major a renovation can prove to be. As such, not only should a
seller complete renovations to make their business marketable, they
should also complete them well in advance to avoid complications down
the line.
Don't Underestimate Curb Appeal
Business sellers often go to great lengths to
perform necessary upgrades to the insides of their establishments, but
completely neglect how the business looks on the outside. Sellers should
remember that the outside of the business is the first part of the
business a potential buyer will see, and first impressions can mean
everything.
For this reason, it's important to make sure the
business exterior looks as good as the inside. Does the property look
clean and welcoming, or is it poorly landscaped and in need of
renovation? As with inside upgrades, outside renovations should never be
put off to the last minute, but preferably taken care of prior to
putting the business on the market. Once a potential buyer is scheduled
to view the property in person, sellers should then do another
inspection and complete any necessary last minute fixes.
Offer Seller Financing
Recent economic hardships have left many potential
business buyers without the financial means to purchase a business.
Thus, a business seller's willingness to finance at least part of a sale
has become a major factor in marketability. With most independent
buyers unable to access necessary funds from lending institutions or
afford a down payment on their own, seller financing has become an
essential ingredient in closing business for sale deals.
When sellers offer financing in a transaction, they
allow buyers to pay some of the purchase price of the business in the
form of a promissory note. It means the buyer agrees to pay back the
remainder of the sale price, with interest, at a later date. This
scenario does obligate the seller to have a continued stake in the
business, but if a buyer is a good investment risk, a seller could reap
great benefits by "being the bank." Seller financed businesses typically
sell for 15 percent more than businesses in all cash sales, and
interest accrued down the line could add greatly to the principal value
of a business.
To attract more prospective buyers, business sellers
willing to provide financing should be sure to advertise it as they put
their businesses on the market. Because seller financing has become so
important in marketing and selling a business today, we launched a
feature on 2misi.com that allows sellers to clearly advertise their
willingness to offer it. Buyers then have the ability to search only for
businesses that are at least partly seller financed. The feature has
led to increased listing views for sellers offering financing,
significantly boosting the marketability of their businesses.
Step into a Buyer's Shoes
When selling any type of business, it can be easy to
forget what it's like to be in a buyer's position. There's so much
responsibility involved in putting a business on the market that many
sellers lose track of the "big picture" as well as their grasp on what
makes a business appealing in the business for sale market in the first
place. They might feel so pressured to sell quickly and for a certain
price that they neglect steps that can be essential for a smooth sale.
To make sure their businesses are as marketable as
possible, sellers need to take a step back and remember what they looked
for when they went through the process of buying their business. Were
there specific details they looked for in business for sale listings?
How much of an impact did their first look at the outside of a business
have in their decision to pursue or abandon a purchase? The potential
buyers will be going through the exact same process, so those who have
taken the time to properly prepare, and have the ability to think like a
buyer, will be the ones most likely to experience smooth, successful
sales.
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