Enhancing Seller Success: Tactics for Private Business Owners
While publicly-held companies are seen as an open book, offering a reasonable level of transparency, privately-held companies are more reticent about disclosing their internal operations and financial details. Consequently, potential buyers of privately-held businesses often find themselves wading through available information to ascertain if a proposed valuation or price aligns with reality.
Understanding Public and Private Businesses
Establishing a price for a privately-held company typically takes more effort since these companies aren’t required to handle audited financial statements. The high cost associated with audited financial statements often deters privately-held companies from going public. Unlike private businesses, publicly-held companies are expected to disclose more information, including sensitive financial data.
The Seller’s Role
If you’re a seller, you can adopt certain measures to streamline the process for buyers. Collaborating with your accountant to ensure the numbers are accurate and presented in a user-friendly manner can be beneficial. This practice can foster trust between buyers and sellers and subsequently enhance the probability of selling your business.
Assessing value is another domain where private company sellers can assist buyers in determining the price or value. Sellers should consider enlisting an external appraiser or expert for their business valuation. An outsider’s opinion carries more weight, and employing an external expert is another tactic sellers can use to bolster overall trust with potential buyers.
Establish Your Ideal Price
A crucial step for sellers is to determine their desired price. This is the price that the seller ultimately hopes to achieve. It is also beneficial for sellers to ascertain their minimum acceptable price for the business well in advance.
When setting a price, sellers should be aware that buyers are likely to pay special attention to certain areas of the business. Some areas that buyers are likely to scrutinize include:
- Extent and diversity of the customer base
- Capital expenditure requirements
- Overall market stability
- Consistency of earnings
- Competitive landscape
- Business relationships with suppliers
In all transactions, the market has the final say on any business sale. Sellers should anticipate receiving a price somewhere between their asking price and their lowest acceptable price. However, adopting the right strategies throughout the process can certainly streamline the process and enhance the likelihood of success.
