pitfalls facing sellers of a business
Seller Pitfalls
April 6, 2017
mistakes buyers make
Top Mistakes Buyers Make
April 6, 2017

Why Do Buyers Buy?

why buyers purchase a business

A buyer will buy your business, not for what it has been, but for what it can be, and to:

Acquire new products/technology/markets
Achieve growth more rapidly
Acquire established presence in market (area)
Avoid risks of start-ups or expansion
Strengthen position in particular markets
Acquire undervalued facilities
Acquire undervalued businesses

What Is the Value of Your Business to Buyers?

Value Drivers:

Earnings stability
Gross profit percentage
Reputation/image
Customer loyalty/continuing customers
Customer diversity vs. concentration
Personnel retention/management depth
Historical and projected growth rates
Market size and penetration rate
Key locations

“Growth Potential”?

Buyers will not pay money for “growth potential”
They will pay only for current and past performance of the seller’s business

What Buyers Look For:

Provable books and records
Reasonable price
Leverage and terms
Living wage
Furniture, Fixtures & Equipment (FF&E) (current Fair Market Value, not overstated)
Appearance
Lease (reasonable term and cost)
Training (by seller for 1–6 months)
Covenant not to compete
Good reason for sale
Time is of the essence
No last-minute surprises

Prepare to Share With the Buyer

Provide the following only after the buyer signs a Confidentiality Agreement:

Historical financial statements
Tax returns
Employee lists
Accounts receivable aging
Facility and equipment leases
Environmental reports
Pension, profit-sharing, and all other benefits
Union contracts or organization activity
Pending or threatened litigation
Customer lists
Other important agreements

Buyers will pay a fair market price for a business that can support its history and has the opportunity to be more in the future under the new owner.

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