When you’ve made the decision to sell your business ideally both the premises and your books need to be on point. If the business does not appear to be looked after, the buyer can suspect some concealment or deception.
Along with this you’ll need to be careful about your responses to any questions you are asked. There are four questions all serious buyers will ask you during their due diligence, and you should make sure that your answers don’t scare them off. If you are able to answer these questions, then your business should be in good stead for a smooth sale.
Here is an overview of how to approach each question and what you should have prepared in response to them:
Can I speak to your employees and suppliers?
Obviously, however transparent you are trying to be, a buyer would be rash to just take your word for everything. It makes sense to speak to the people at the sharp end to see what their view of the business is. And assuming you have a reasonable working relationship with both your staff and your suppliers, you should always agree to this request.
The danger comes when you have made the decision to sell but haven’t informed anyone else who may be directly affected by the sale. In this case an honest reply is always best. Just let the buyer know that you have no problems at all with them speaking to staff and suppliers, but ask for a little time so that you can tell them about the sale first. The last thing you need is disgruntled employees and suppliers, and a buyer who feels side-lined.
Can I see the last three years of your books?
If you have spruced up your premises in preparation for a sale, it makes sense to include a spring clean of your books as well. That includes paying any tax due, and settling any outstanding lawsuits. You also cannot think you can get away with concealing any kind of outstanding debts – however small.
Simply refusing to allow perspective buyers to see any earlier than the past year of your finances, will instantly instigate that you have something to hide. If you have prepared properly before putting your company up for sale, it shouldn’t be a problem as there won’t be any glaring problems.
Can we arrange a handover?
The main worry for a buyer is that you are indispensable to the business. If you can remove yourself in advance from the day-to-day running, then this is far more appealing to them and the handover should be less of a worry.
It is natural to expect some sort of handover process and there should be no problem with you agreeing to this, so don’t just brush it away as inconsequential. Agree that a handover will be carried out and even suggest putting it into the paperwork to show your willingness. This will put the buyer’s mind at rest, and make it seem less like you are ready to run as soon as the deal is done.
Can we negotiate on the price?
You may want to get as much as you can for your business, after all you have put your heart and soul into it, however, you don’t want to sabotage a sale with greed. The asking price needs to be reasonable and it makes sense to have a full valuation, but also any extra homework you can do to help decide on the final price will be helpful. Check the current market, various local and business-specific trends, as well as any similar businesses that have recently sold.
When you have decided on a figure for your sale, also work out what your lowest limit would be. It can be beneficial for the buyer to think they have bargained a great deal from you, by instigating further trust in the exchange, so under these circumstances it’s always best to say you are willing to come to a mutual agreement. It makes sense to be pragmatic in these situations. A sale for a slightly reduced price is often better than being stuck with the business for months or years after you wanted to sell because you wouldn’t negotiate.
Selling a business is a dual affair. Both you and the buyer need to be happy that you have struck the right deal, and that you are confident in the sale. If you are as transparent as possible, it will be a successful sale for both of you.
By Bruce Hakutizwi, USA and International Accounts Manager for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses. Bruce has over 7 years’ experience working within the US business transfer marketplace connecting buyers and sellers.