Do You Have a Sellable Business?
What makes a business sellable? Simply put, a business can be sold if there is a willing buyer for the business. Which begs the question, what are buyers looking for? Often buyers don’t really know what they want until they find it.
When we ask buyers what they are looking for, the most common answer is:
“A strong cash flowing business, in a growing industry, with high barriers of entry and an existing management team in place.”
Show us a business like this and we would have a line-up of buyers. The reality is that there is no such thing as a perfect business. Businesses, by nature, have flaws and issues and buyers need to realize that these flaws and issues are what we call RISK. Every business has RISK associated with it, and if someone ever says that they have a no-risk business opportunity, walk away.
Buyers do not always look only at profits and growth opportunities. Sometimes, buyers may be interested in acquiring a certain asset of the business and are willing to buy the entire business to obtain this asset. Sometimes the asset may not even be a tangible asset. For example, a person may buy a business to get access to the location, a customer list or a website address. Competitors may purchase a business only to close it down in order to capitalize on the decreased supply in the market. In some instances, businesses are bought for their liabilities and the tax benefits associated with these liabilities.
Purchasers ultimately make their decision on whether to purchase a specific business on the Risk-Reward profile of the business. What is not always evident is what reward a given buyer gets from acquiring a specific business.
As you ask if, when and how you will sell your business, don’t assume that just because your business is not making any money that there is not inherent value in the business. To find the value in any business, ask yourself the following questions:
-
- What makes my business successful?
- Why do customers come to my business as opposed to my competitors?
- What value do I add to my customers?
- What am I best at?