How To Make Your Business More Appealing To Your Buyer

Do all you can to lower the buyer's risk

Maybe a better way to say that is to lower the buyer's perceived risk. All business people hate risk, but buyers are especially sensitive to it since they are entering unknown territory when it comes to your business.

Of all the different businesses you prospects will consider buying - all other things being equal - they will choose to buy the one with the lowest perceived risk.

Here are 3 important steps you can take to lower the buyer's perceived risk of buying your business:

1.) Get your financial statements in order.

If I had to name one thing that you should do to maximize your chances of selling your business (and selling at the highest price) it would be to have detailed and accurate financial statements. If the buyer doesn't trust your financial statements they won't buy your business. Hire a professional to prepare at least 3 years of financial statements and your prospect will feel much more comfortable about investing in your business.

2.) Be honest about the business' weak spots.

Buyer's will usually find the skeletons in the closet.

So don't try to hide them.

If a large portion of your accounts receivable are old and/or uncollectable, if key employees plan to leave after the sale or if the machinery is old and the inventory obsolete, the buyer will find these things out eventually. Better that they hear the truth from you up front than to discover it on their own later on. When they find out the truth on their own they will distrust everything you say and they will perceive that buying your business is risky.

3.) Reduce your contingent liabilities.

Issues like unpaid taxes, accounts payable in dispute with a vendor or accounts receivable in dispute with a customer will always put off a buyer. The unknown is scary and the buyer will almost always assume the worst.

Don't even let these items become an issue.

If you to address these problems up front it will always be easier to fix and will cost you less than what the buyer will imagine in their worst-case-scenario thinking.

Confidentiality - Why It's Important.... Even When It's Not

Usually, we use the term confidentiality to mean that the sale of your business is a secret. But when the business is very small or the owner is ill or has talked openly about retirement, the sale has always been common knowledge.

If this is the case, you should still be concerned about confidentiality.

Your tax returns, P&L statements and customer lists are still confidential documents. Proprietary information like manufacturing processes or recipes add tremendous value to the business the buyer is paying for.

Regardless of your situation, you must insist that prospects sign a confidentiality agreement before seeing any in depth financial information and you must insist buyers only talk to you (and not your employees) throughout the process.

Sometimes you will get requests for information from a very good prospect that you just can't fulfill. For example, early in the process, a buyer may request a list of your customers or suppliers. (He may even ask to meet with these people)

You must determine why the buyer wants this very specific information. Does he want to steal your customers from you? Or perhaps the buyer wants to see if you are overly dependent on one customer. If 80% of your revenues come from just one or two clients, that is a legitimate red flag that would concern any buyer.

But your prospect doesn't need a complete list of your customers along with contact information to find this out. Instead, you can prepare a report that shows what percentage of you revenues comes from each customer (or the top 10 or 20 customers if that's more appropriate).

So, whenever a buyer makes a request for an entire category of information, don't flatly refuse. Instead, try to figure out the buyer's specific need or concern and then provide just enough information to satisfy that need.

In addition to the names and contact information of your customers and suppliers, information that should be off limits until a buyer signs a Letter Of Intent should include all proprietary information regarding your manufacturing processes, blueprints, recipes, product diagrams.

Remember: Only one of your prospects will end up buying your business. But all the other prospects will still posses whatever information you give them after they drop out.

So a good question to ask yourself when deciding whether or not to provide certain information to a prospect is:

If this person does not buy my business, could they use this information to harm my company's value or the success of the new owner?

If a buyer absolutely insists that you provide a certain piece of information that you are uncomfortable providing, you have three choices:

1.) You can flatly say "no" and risk losing him as a prospect.

2.) You can give him the exact information he asked for

3.) You can prepare a report that provides just the information you are comfortable revealing and hope that it will satisfy the buyer's need.

Exactly how you handle a situation like this will depend on the quality of the prospect who makes the request.

You should rank all your prospects according to their qualifications and desirability - Which prospect do you want to take over your business? You may decide to give that prospect much more detailed information than the buyer at the bottom of your list.

But whatever you decide, make sure that the buyer understands you are not trying to hide anything: it's just that there is certain information that you are uncomfortable releasing now, but that once the buyer has submitted a Letter Of Intent he will have complete access to your business.

Just because the sale isn't a secret doesn't mean prospects can just show up at your business whenever they please, or have direct contact with your employees when you are not around.

Even when the sale is not a secret this information is highly confidential and must be protected.

How To Write An Effective Business For Sale Ad

I know a lot of business owners who can talk your ear off about the ins and outs of their business. But sit them down in front of a keyboard and ask them to write a 3 sentence promo for a business-for-sale ad and they don’t know how to start.

If that sounds like you then you are probably trying to do too much with your ad. Writing an effective business for sale ad is simple if you just keep these two facts in mind.

Fact #1: The Goal For Your Advertisement Is To Attract Qualified Buyers And Motivate Them To Request More Information - That’s all!

I’ve read advice elsewhere that says you should include every fact you can about your business in the ad - the more you tell, the more you sell.

I could not disagree more!

You can't sell your business through an ad, you can only hope to locate people who are good prospects and peak their curiosity. Try to tell the reader just enough to get them interested in your business and wanting to know more. The reason this is the best approach is because of Fact #2.

Fact #2: Buyers don't READ online ads, they SCAN them. Buyers scan ads and don't read them because there are so many ads out there -- no one could read them all.

What they will do though, is scan the page looking for a few hot-button words that catch their eye. A high quality prospect will have a general idea of the types of businesses that appeal to him.

He will have certain hot buttons related to:

**Business Type **Business Location **Price Range

When he comes across one of his hot buttons, the buyer will then slow down to read more details about that particular business. While scanning the ads the buyer is compiling a short list of businesses with which to follow up. It should be your goal to get on the short-list of high quality buyers while simultaneously being left off the short-list of the unqualified tire kickers.

There is not much you can do about the type, location and price range of your business - they are what they are. So the key to writing a good ad comes down to the "Description" or "Comments" section of the ad.

The thing to remember when writing the comments section of the ad is this: Tell them just enough information to get them interested - but leave them wanting to know more.

Simply mention 3-5 positive elements of your business and spend 1 or 2 sentences describing them.

Some things you want to mention are: -You have a transferable lease in place with attractive rent and an option to renew -You are located on the corner of a busy intersection -You will stay on with the business temporarily for a training period -You have lots of repeat customers -You have unique or patented products -Sales and profits have been increasing each year.

Earlier, I mentioned that while you want to be on the short list of good prospects, you also want to keep off the list of unqualified prospects.

There are a lot of people with no available cash and bad credit who think they can buy a business. To avoid getting a lot of response from the wrong people, here are some mistakes you want to avoid:

*Under no circumstances should you ever write OBO ("Or Best Offer") next to your asking price. It's sends a signal that you are desperate. Every bottom feeding, low-balling, shark will come out of the woodwork just to see if they can steal your business.

*If you include a reason for selling, make sure it's a positive one such as retirement or to pursue other business opportunities. Every buyer will want to know why you are selling. But now is not the time to let them know you are under the gun due to divorce or illness.

*Don't over hype the business. There is no reason to use phrases like: "OWNER HAS BRAIN DAMAGE! .... IT'S A STEAL AT TWICE THIS PRICE!!!!!!!!!!!

When a prospect reads these kinds of statements he just moves on to the next ad. If the business was really solid, the seller would not have to resort to these sorts of statements.

Here is an example of a well written ad:

Retail Furniture & Design Accessories

Location: British Columbia Gross: $1,350,000 Net: $150,000 Selling Price: $150,000 + stock, leaseholds Years Established: 17 # Of Employees: 4 Terms: Negotiable Comments: High traffic location between a Wal-mart and a shopping mall with excellent lease. Boutique designer style store promoting quality with solid wood and real leather furniture, designer accessories and bedding. Easy operation with trained staff & point of sale computer inventory system. Large positive cash flow with protected product lines and established accounts. Established, loyal clientele creates lots of repeat buyers and referrals. Live and raise your family in a friendly tourism area. We are located in the foothills of the Rockies. The town is a crime free, recreation town with great schools and facilities. Owner is retiring after developing a successful respected business over the last 25 years.

All the information in the "Comments" section is positive and informative without being too long winded. This is a great example of giving people just enough information to get them interested and the prospect now must contact the seller to find out more - which is exactly the situation you want to create!

For a more examples of good (and some not so good) business for sale ads go here: How To Write A Good Business For Sale Ad

Sell My Business - Are There Any Buyers Out There?

Year in and year out, the most common question I hear from business sellers is, "How do I know how much my business is worth?" Or "How can I determine the right price?"

But since last fall, the question I have been getting most often from sellers is some variation of, "Is now a good time to sell?"

Or more precisely, "Is there anyone out there who wants to buy ?"

Well, there are plenty of buyers out here - highly qualified and motivated buyers is most cases.

Due to layoffs the number of unemployed but highly qualified executives and mid-level managers has increased in recent months. For those former managers and employees it is nearly impossible to find a comparable job with comparable pay, especially for those in their 40's and 50's.

For many businesses in the $500,000 price range or less, where the owner manages the business day to day, these recently unemployed professionals are the perfect buyer.

**They have years of valuable business experience

**They usually have significant financial resources - meaning they can produce the down payment you are looking for and can qualify for financing a significant amount.

**There is the real possibility that they will have no choice but to create their own opportunities if there is no future in their previous industry.

** They are looking for a business that they can own and manage as a way of replacing there job.

As the economy has worsened more qualified buyers who fit this profile have been created and we are starting to see more demand for stable, profitable businesses.

Meanwhile, many owners who are ready to sell have been scared out of the market by the constant din of bad economic news. If you are one of those "ready to sell" business owners who has decide to put things on hold now may be the perfect time to get back into the market.

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