IBA No Comments

4 Steps to Attract Potential Business Buyers

The question is less of “How can I attract interest?” and more, “How can I attract the right interest?”. Let’s talk about how you can target the best buyers to your specific business opportunity.

1. Identify Your Potential Buyer Pool

Most interested parties can be broken down into one of two groups: strategic and financial business buyers. The first is usually an external group, a competitor or synergistic buyer, who wants to acquire your business to expand their current operations. The second type of buyer is looking to acquire your company for its profitability. This is typically an individual or a partner group with no other affiliations. Research the advantages and disadvantages of each buyer profile, so you can best target your ideal new owner.

2. Fine-Tune Your Online Presence

businessmen shaking hands

Nearly all prospective buyers begin their search online, which is why there are dozens of websites available to list your business for sale. You’ll be competing against other small business owners for your ideal customers’ interest, so you’ll want to stand out. We recommend partnering with a business broker who can get your organization listed and optimized on all the prominent business search engines. IBA hosts the largest proprietary database on its website, so if you’re looking to maximize the number of interested buyers and make a great first impression, working with us is a must!

3. Sell Your Story

Buying a business is a large investment, not just financially but emotionally and mentally too. The right buyers want to connect with the opportunity before they commit. So, make sure your marketing materials communicate the selling points unique to your business. When meeting with prospective new owners, don’t be afraid to elicit an emotional connection with this person, especially from an individual or partner group. You’ve put a lot of blood, sweat, and tears in your business. Leave it in good hands with someone who truly cares!

4. Don’t Hide Weaknesses or Threats

Most business owners don’t intend to be deceitful in their proposition. The problem is that many have an unrealistic idea of what their business is worth, and either doesn’t acknowledge or downplays very real flaws. The first thing we recommend is to receive a professional valuation, so you can set a fair asking price that your customer base would be willing to pay. Secondly, you should prepare before meeting with potential customers, so you’re not blind-sided by their questions. They will notice and ask about your business’s weaknesses and threats, whether in your financial statements, infrastructure, etc. So, do not try to hide them. Rather, try to think outside the box. Is there a way you could have overcome any of these issues if you had more money? More staff? More time? The right buyer could be willing to look past certain things if offered an attractive solution.

Interested buyers are out there, but as we mentioned before, it’s more about finding the ideal person for your situation. Indiana Business Advisors can help you identify the best successor for your business! Start your search for the right buyer and contact us today. 317-573-2100

IBA No Comments

The Do’s and Don’ts of Seller Financing a Business for Sale

Seller financing a business for sale is when the owner is willing to personally finance a portion of the purchase price. Oftentimes, this increases the likelihood of the selling your business. While it is tempting to consider because of the heightened chance of a faster sale, seller financing your business is a serious consideration that needs to be deeply evaluated before attempting. What should you know before seller financing a business for sale?

6 tips to consider when seller financing a business for sale:

1. DO assess the risks. You will be tied to the business long after the sale is complete.

Unlike a cash sale where the seller can comfortably walk away from the business with money in the bank, when you seller finance a business, the seller continues to be tied to the business for a pre-determined amount of time after the sale is complete. If the business succeeds, the new owner pays back the principal with interest and everyone is happy. But if the new owner fails, the seller could suffer the loss of interest income and incur additional costs to collect the debt.

The bottom line is that a seller-financed sale needs to be evaluated as a business investment. Like any other investment, there is a certain amount of risk inherent in the decision. If you are comfortable enough to invest in the new owner, then it could be beneficial to finance the sale yourself. You’ll likely close the deal more quickly, receive a higher asking price and earn income from collected interest.

2. DO leverage the benefits of an interest-earning investment.

Your willingness to carry the note in a seller financed transaction is an interest- earning investment. If the buyer is a good investment risk, the seller stands to reap substantial benefits from self-financing. Too many owners view sellers financing a business as a desperate measure to unload the business when they should be viewing it as a resource for enhancing the benefits of the sale.

Right out of the gate, your willingness to hold paper increases the final selling price of the business. Partially-financed sales typically result in a price that is more than 15 percent higher than their cash sale counterparts. That means you can leverage your willingness to finance as a bargaining tool during negotiations.

The other big benefit of offering seller financing is the potential to multiply the principal value of your business through future interest payments. As you might expect, a financed sale garners a much higher rate of return than many other investment vehicles with a 5-7 year note at 8-10 percent interest as the norm. Remain firm on charging the amount of interest you feel is appropriate for the market and the level of risk you are assuming.

3. DO advertise seller financing when you list your business for sale.

Advertising seller financing in your business for sale listing can be a big plus that attracts more buyers. If you are comfortable with financing part of the sale, you should include that information as a selling point in your marketing efforts. Offering seller financing attracts a larger pool of serious buyers, including those who may not otherwise have the ability to secure financing at your asking price.

4. DON’T waive the down payment. A healthy down payment can minimize your risk.

Seller financing a business for sale can be a risky venture. However, a healthy down payment can minimize your exposure by distributing an equal or greater amount of the risk to the buyer. Unlike home mortgage lenders, who sometimes require a down payment of 15 percent or less, business loans usually require a much higher upfront investment.

Generally speaking, it’s in your best interest to finance no more than 20 to 50 percent of the sale price. If you decide to finance more than that, you need to have a legitimate reason for doing so. For example, if you are selling the business to a family member, you may have a vested interest in financing an amount beyond the normal range. Yet, as your financing commitment increases, so does your risk.

5. DON’T do it yourself. Get legal and professional advice from someone you trust.

By definition, seller financed business for sale transactions contain shades of do-it-yourself. Instead of relying on professional lenders for financing, the seller assumes the responsibility for a percentage of the buyer’s investment. Get someone with professional experience to assist you.

6. DON’T be pressured. Trust your instincts.

There’s a good chance that potential buyers will try to push for a seller-financed business deal. This is particularly true for buyers that are unable to secure financing from traditional lending sources due to an inadequate down payment or other borrowing obstacles.

No matter how anxious you are to sell the business, caving into buyer pressure for the sole purpose of closing the deal is a big mistake. When a buyer pushes too hard for seller financing, take a step back and conduct a simple reality check. If you aren’t completely comfortable with financing the buyer’s purchase, walk away and wait for a better buyer candidate to emerge.

Source: Bizbuysell

IBA No Comments

Be Ready for the New Year: A Pre-Sale Checklist for Selling Your Business

Pre-Sale checklist for selling your business

Are you planning on listing your business for sale in the New Year? You may be ready to proceed immediately, offering it for sale “as is” and prepared to make price concessions to account for any of its unaddressed weaknesses. Or, you may have decided to delay listing it until you’ve made the necessary improvements to overcome its weaknesses and make it more attractive to prospective buyers.

In either case, you must first evaluate certain key aspects of your business and then assess each them. Through this process, you will be deciding whether your business is ready to present for sale, or improvements need to be made in order to attract prospective buyers.

The following pre-sale checklist is a great way to start preparing your business for sale in an organized and efficient manner.

  1. Flag areas of your business in need of pre-sale improvement.
    • Make a list of these areas and rate them as either: good, average or poor. The primary aspects buyers will look for include: legal condition, business image, business operations and organization, products, clientele, and transferability. Buyers are attracted to businesses with low risks and high rewards, and these are the aspects of your business they will look for when considering it as a possible purchase.
  2. Commit to a pre-sale improvement action plan.
  3. Create your pre-sale improvement plan.
  4. Keep your sale plans quiet while you prepare your business.
    • Maintaining a level of confidentiality is extremely important in the business sales process. If word of the sale leaks out to customers, suppliers, creditors, employees or competitors, this could instigate a negative reaction, interfering with your business’s operations and affecting its value.
  5. Add value to your business now.
    • Whether you choose to sell your business “as is” or make the necessary improvements to improve its value and attract more prospective buyers, this to-do list is a great way to assess the condition of your business and create an action plan going forward.

If you are ready to start the discussion of how to prepare your business for sale or to discuss a Business Pre-Sale Checklist, contact one of our business brokers today for a complimentary consultation. Call 317-573-2100 or email info@indianabusinessadvisors.com

Article: Bizbuysell

IBA No Comments

Preparing To Sell Your Business In 2021

Will 2021 be a good year to sell your business? As we enter into the new year this could be a question you are asking yourself. In the midst of a pandemic and recession, many businesses will not make it out of 2020. However, there are many businesses that have been thriving that are attracting eager buyers.

Buyers are very interested in buying good profitable companies. As we look at the businesses that have been profitable this year, we see most in the healthcare, distribution, construction, manufacturing and service industries. These businesses have stood out in 2020 and buyers are eager to enter into recession proof markets.

If you are looking at selling your business in 2021 the time to start the process is now. The average time it takes to sell a business is 6-10 months. To expedite this process, here are some key things to get in order:

  • Financials
    • When it’s time to put your business on the market, make sure your financial paperwork is clean. Income statement, balance sheet and tax returns are just some of the documents a buyer will want to review.
  • Develop your exit strategy
    • When you sell your business, will you stay on during the transition? Or will you step away immediately to begin your next adventure? What happens after the sale is as important to think about as the sale itself, particularly if you have a team of trusted employees.
  • Determine your business value
    • Our office includes an accredited business valuation specialist who will work with you to determine the value of your business using an earnings multiple.