Business Owners Resource Network

April 6, 2009

How Does A Buyer Decide What Business To Buy? What Business Owners Need to Know….Part Two

Filed under: 1,Business Brokers,Business Valuations — alieser @ 7:45 pm

 

In “How Does A Buyer Decide What Business To Buy?  What Business Owners Need to Know….Part One”, I addressed the impact that accurate record keeping and reporting has on the sale and value of a business.  In that blog, I suggested that the main reason a buyer chooses one business over another is the financial history. 

 

Once a buyer has seen the historical financial performance of a business, is comfortable that it meets his financial needs, and has determined that the data is reasonably accurate, his second concern is whether the business can sustain or improve that performance without the participation of the current owner. 

 

So, as a business owner, how should this knowledge affect your day to day operations?

 

As a business owner, it is important for you to set the stage for your eventual exit from the business.  This involves training employees so that they are capable of assuming some of your duties, especially those that involve interaction with customers.  Make sure that you are not perceived as the only “face” of the company. 

 

If it is normal in your industry to have contracts with customers, vendors or employees, implement these contracts long before you desire to sell as an indication to the buyer that each of these entities intends to continue their current relationship with your company.

 

Automate systems where logical to do so.  Spend some time documenting your procedures.   Clean house.  Perform maintenance.  To pay the highest price for your business, a buyer needs to feel that the necessary resources for him to be successful are already in place.  He needs to know that the business has been well tended and that it will not be complicated or require additional financial investment for him to step into your shoes.  Otherwise, the buyer will discount the value of your business to accommodate any additional cash outlay or effort that he perceives will be required to get the business to this level.

 

Stay tuned for additional tidbits on increasing the future value of your business.  Or feel free to call me or post questions or comments.

 

 

Anita Lieser, Senior Business Broker

913-433-2306

Sunbelt Business Advisors

7101 College Blvd. Suite 1650   Overland Park, KS  66210

 

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