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Getting the Best Price For Your Business
Getting the Best Price For Your Business
The main thing to keep in mind when selling a business is the same thing you need to keep in mind with whatever you are selling - what is the buyer looking for? You get nowhere when you focus on what you want from your buyer; but you can get what you want if you focus on what your buyer might want from you. The basic conundrum is that, here you are - you have a business, and you want to improve your position by converting it to cash. On the other hand, there is a prospective buyer, they have cash, and want to improve their position by converting it into a business - hopefully yours.
Your "circle of interest" represents the value of your business to you, and the distance between your circle, and the buyer's circle, the "Price Barrier", is the difference between your perception of the value of your business, and the buyer's perception of its value.
You might start off with a very high value on your business, but your price expectation eventually diminishes (your circle moves to the right, towards the buyer's circle), due to such factors as:
- You want to retire
- You are sick of this business
- Changes in family or partnership circumstances
- Frustration at working too hard
- Difficulties raising capital to fund further growth
- You are offered sufficient price which, combined with any of the above, motivates you to part with your business.
The buyer's "circle of interest" represents their accumulated wealth, and all the effort which has gone into raising it, along with their very real fears of losing with it.
Their interests will move closer to your interests (circle move to the left) when their fears of losing their money are outweighed by confidence factors to an extent where they will begin seeing positive value in your business.
The factors which might shift their perception of the value of your business closer to yours might include:
- Synergies with their own business
- Wanting to build on your client base
- Wanting to acquire new technology
- Reliable and attractive profit figures
- Experienced personnel.
On the other hand, the factors which might shift the buyers perception away from yours might include:
- The perception that your business requires too much of your personal involvement
- Lack of systems which would enable a new owner to "slot" readily in
- Unreliable profit figures
- Insecurity about your suppliers or customers, or position in the marketplace.
For a sale to eventuate, your two circles of interest must eventually meet, at a point where the buyers perception of the value of your business meets your minimum requirement for compensation for all the effort you have put into building up your business.
Whether you have to move further to meet the buyer, or the buyer can be persuaded to meet you, depends upon how much evidence you can produce, to justify your position. The greatest barrier to getting the buyer interested in your business is their fear of losing their money. The best way to prove to them the value of your business, to the extent that they will pay your price, is to give them confidence in his/her ability to make a success of it.
The buyer knows very little about your business, so it is up to you to prove these things to them. The way to do this is through evidence.
Lloyds Business Brokers specialise in commercial business broking services to mid market enterprises. Visit their smallbusiness[HQ] listing here.
Important - Read This: This information is intended to provide general information only which may not be applicable to your particular circumstances. You agree to access this information at your own risk and that First Point Media is not liable to you for the content of the information or any reliance by you on this information.
