It is amazing how many sellers approach the sale of their businesses with a dogmatic, arrogant attitude of “take it or leave it.” The basis for the asking price is, too often, the amount required to fund the next stage of the seller’s life; be it retirement, another business or an investment target. Their business valuation is not based on market requirements, but on their own ideal outcomes. They entertain very little discussion and only a single position as a target.
I’m not suggesting that you should change your offering for every prospective purchaser that looks at your business, because this will drive you mad. But you should give some thought to who your likely buyer is, and what they will want to see in the investment.
In Daniel Priesley’s book Key Person of Influence, he writes at the beginning of chapter 2:
“Across all industries, the top opportunities go directly to a small group who present themselves as Key People of Influence in that field. The rest of those in the industry are left to fight over the opportunities that the KPIs turn down. It might sound unfair, but that’s how it is.”
In the book, Priestley’s message is all about being a key person of influence (KPI) in an industry, community, or environment. Something similar may be applied to the disposal of a business, if I might paraphrase Priestley: When a business is “on the shelf ready for sale” the top investment decision goes directly to those businesses which present themselves better than the others”.
If you read Priestley’s book, you will notice that I have borrowed some more from the same chapter:
You need to Productise your business. Beyond your business supplying products and services, it needs to become a product itself. It needs to become an ecosystem for a collection of products or services. You probably have stage 1 in this goal already, which is why you have a business to sell. A successful exit from the business at above average value involves the former suggestion – making the business something more than the rest in terms of PrepareYourBusinnessForSale™: The top opportunities go to those who present themselves best.
It makes sense as an eventual business seller, that you should start thinking about providing a buyer with what he wants. And what the buyer of any business wants is profits and cash flow, presented in a manner which will withstand the rigors of due diligence.
Until you learn to see the business through the eyes of a potential buyer, you will be hard pressed to sell it effectively, and yes, I know that it is not necessarily your intention to sell it right now, but that intention may change suddenly, beyond your control – remember?
Look at this way: If you were buying your business, what would your concerns be, and how can you best deal with these concerns today, knowing what you do about your business, without having your back to the wall in a “must sell” situation?