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What Buyers Want

A buyer no matter how sophisticated is looking for value. Whether it’s the dream of an entrepreneur to support their family, or a Private Equity Group who has the strategy to build and sell, everyone looks for provable VALUE. Buyers needs’ can take into consideration how much a family must earn to support or create a certain lifestyle; or support the platform acquisition strategy needed to give investors a high rate of return. No matter the reasons, buyers are looking for:

  • Provable books and records
  • Reasonable price and terms
  • Financial leverage
  • Discretionary Earnings (“DE”)
  • Furniture, Fixtures and Equipment (“FF&E”)
  • Transferable lease
  • Training after the acquisition
  • Good appearance
  • Covenant not to compete
  • Understandable reason for the sale
  • Dealing in a timely manner 

No Surprises

Unexpected surprises cause buyers to evaluate whether or not to move forward with the acquisition of your business. If the facts are disclosed in advance, almost any problem or concern can be dealt with and solved during negotiations. Be prepared to disclose:

  • Any changes in earnings or revenue
  • Tax payments that are in arrear
  • Problems with the landlord or lease
  • Loans and registered liens against the business
  • Equipment leases
  • Compliance with zoning and health regulations
  • Pending litigation
  • Loss of major customers
  • Change in availability of suppliers 

Seller Financing

When contemplating the sale of a business, an important consideration is how much of the purchase price you would be willing to finance for a qualified buyer. The reason is simple: “all cash” buyers for businesses are rare, and in most cases, it does not make economic sense for a buyer. 

While the uneducated seller interprets financing as risk, statistics do show that sellers receive a significantly higher purchase price if they decide to offer some form of financing on the sale of their business. With reasonable terms to the financed note, the chances of selling increases and the time period to sell decreases. Seller financing communicates to the buyer that you are confident in the ability of the business to retire its own debt and in simple terms, “pay for itself”. Seller financing offers many advantages that, when carefully considered, may outweigh the perceived satisfaction of waiting for an all cash transaction:
  • Seller financing greatly increases the chances that a business will sell
  • Seller financing commands a higher selling price
  • Interest on the seller financed portion of the transaction can significantly add to the total proceeds received for the sale
  • Interest rates on seller notes are higher than money market or bank rates
  • Positive tax consequences compared to an all cash sale (always check with your tax professional) 

Whether you are financing the majority of the debt or just a portion of the down payment needed for the buyer to qualify for bank financing, there are many creative ways to structure a “Seller Financed” transaction. VR intermediaries are skilled in transaction financing and provide proven Valued Representation throughout the sale of your business.

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