Decoding Buyers’ Expectations: What Do Prospective Business Buyers Seek?
As sellers ready their businesses for sale, they often ponder what buyers are genuinely seeking, aiming to make their venture as appealing as possible. The answer may seem elusive when you’re on the selling side of the deal. So, what are buyers typically mulling over when deciding whether to purchase a business? Unsurprisingly, a significant chunk of their concerns revolves around earnings and stability.
No Room for Unpleasant Surprises
Sustainable earnings are exceedingly attractive to buyers as they provide a clear forecast of what to expect. This visibility allows buyers to evaluate whether they can scale the business beyond its current growth trajectory. Even if the growth acceleration seems unlikely, the reassurance that the business will maintain its current pace is comforting. Naturally, no buyer desires to take over a business that only had a temporary surge in earnings due to a one-time contract or event.
Reliable Information
Aligned with the avoidance of surprises, buyers seek to validate the information provided about a business. Any data related to past, present, or future legal issues, along with other concerns like pending product returns, will undergo rigorous scrutiny. The due diligence phase is when the buyer delves into the intricate details of your business, often with the assistance of a legal and financial advisor.
Accountants or appraisers commonly adjust earnings to exclude one-time or non-recurring expenses. Buyers will want evidence of such expenses, like lawsuit fees or extensive building repairs, since their exclusion inflates earnings. This method can confound buyers trying to grasp the actual earning potential of the business. Such expenses, if not considered, could distort the genuine earning capacity of the business.
The Takeaway
These factors represent just a handful of the critical considerations business buyers make when assessing a potential acquisition. Numerous other factors will guide a buyer’s decision, and being prepared to address their questions and possible concerns upfront is crucial. If not addressed promptly, buyers may lose interest and explore other acquisition opportunities. Try to see things from a potential buyer’s perspective and consider the reassurances you would desire before purchasing a business.
Partnering with a Business Broker or M&A Advisor can be enormously beneficial in this context. These professionals, having worked with numerous buyers, can readily empathize with a buyer’s viewpoint. They can help you prepare your business before buyers commence their evaluations, identify potential areas of concern, and keep the sales process on track, ensuring a smooth journey to the final deal.
