To get a great result on the sale of your business, you need to start thinking like a buyer, rather than a seller.
As a business owner who has decided to sell, this can be a difficult thing to do. But if you can successfully put yourselves in prospective buyers’ shoes and ask ‘what’s in it for them?’ you’ll be much more likely to achieve an optimum result.
So, ask yourself: Who are the buyers? Where do they come from? People buy businesses for many reasons: they may be dissatisfied with their current job, laid off, looking for a family investment or just have a burning desire to have more control over their lives.
No matter what their motivation, all buyers have one thing in common: a desire to see the numbers! Buyers want to see income and expenses and assess the pros and cons of the business.
To present this information, you’ll need to develop an Information Memorandum, a formal document that contains the information a potential buyer will be interested in. In principle, this document is your sales brochure! It must provide enough high quality, convincing information for the potential buyer to decide to make a non-binding offer and move forward to the due diligence phase.
The Information Memorandum must explain:
- The past business performance
- The forecasted business performance for at least 3 years
- A good understanding of the assets and the liabilities of the business
- Reasons why the business is better than its competitors.
So, what’s the best way to put yourself in the shoes of potential buyers? Simply, to seek advice from people who buy businesses. They know what is important for a potential buyer and what is not.
At Gibbons we work with hundreds of buyers and sellers, and know the potential pitfalls. A top tip from one of our Succession Planning Consultants is ‘Be very careful about what you disclose before the deal enters the due diligence phase. Your customer list and their sales, for example, should not be discussed before due diligence formally begins’;
When developing your comprehensive Information Memorandum, remember to ‘think like a buyer’ or seek help from someone who knows how buyers think!