Understand Your Customer

A shrewd salesman puts themselves in the shoes of their customer. By better understanding your customer, the potential buyer, you are more likely to complete the sale of your business more quickly.

In the small business world, the owner is the ultimate representative of their business, regardless of any broker representation or service that you hire to put between yourself and the buyers. The buyer is taking a lot of financial and emotional risk and is likely spending the bulk of his lifetime savings to purchase your business. He will want to be extremely comfortable with your business and unless he has a deep experience in running a business like yours, he will want to be extremely comfortable with you. As the owner of this business, you must be prepared and have the right frame of mind if you wish to move the business off the market quickly.

One of the Most Critical Stages

There are many stages in the process of selling your business for sale. Although they may vary based on the situation, buyers will move through the following stages:

1. Initial interest. In this stage, the buyer has seen an advertisement for your business somewhere and wants to learn more. His interest is fleeting. The more information that you can present to him rapidly, the quicker you can move him to a more advanced stage.

Initial interest is best capitalized on by immediately providing a concise financial summary of the business as well a short description of the products, services, customers and suppliers.

2. Package Stage. In this stage, the buyer believes that what the business does and what the business earns fits his requirements. He wants to review a package that describes all relevant aspects of the business in a detailed and comprehensive fashion. Generally, he will do his own analysis of the macro and market factors affecting the business, and will match the results of his research with the information presented in the business package.

Introduction

Confidentiality is an important factor to consider when selling your business for sale by owner. Too little or too much secrecy can cause problems. You must consider all the constituents of your business for sale and determine which to inform so that you can easily facilitate the sale. This includes your employees, banker, accountant, customers and suppliers. You must also be prepared to execute a Mutual Non Disclosure Agreement between yourself and the buyer. This protects your information and theirs. Finally, be sure to provide copies of any requested information to the buyer and ask to have that information destroyed if the sale is not consummated.

Sellers Need to Inform Important Constituents

Once you have committed to selling your business, it is important to notify those people around you of the decision. Bear in mind that most buyers are going to want to talk to your key employees and want references from a few key customers and suppliers. Finally, your banker will like to keep the business and may likely be the best source of financing for the buyer.

What’s The Difference?

In an effort to define the difference between a sophisticated investment banker and a small business broker, I stumbled upon a lesson for those selling their own businesses. In a nutshell, investment bankers take the time to prepare before marketing a business for sale. Most business brokers and some business owners begin marketing the business for sale long before the preparation is complete. The results are disastrous.

Preparing the Business For Sale

Buyers come in every shape and size. However, their behavior can be categorized based on what the type and size of business for sale they look for.

Private Individuals

Individuals will often look to buy a business for sale with their own funds or borrowed funds from friends, family and/or perhaps a friendly bank. These folks range in experience and acumen and are difficult to categorize. Individuals that have owned or been part of a core ownership team are more likely to be diligent buyers of businesses for sale. Individuals working within a large corporate environment may not have as extensive experience in reviewing all facets of a business for sale.

Many private investors tend to rely on emotional attraction during their business for sale selection process. Because of their emotional bias, they are most apt to overpay for a business. Most small business brokers play on this emotional bias in attempt to get a private buyer to purchase quickly and to overlook key aspects of the due diligence process.