Unless you’ve done it before, selling your business should not be undertaken without plenty of prior research – and arguably some professional help.
Hopefully this article is a useful first step. What follows are some tips for pitching your advertising to attract the right kind of buyer.
Profile potential buyer(s)
Before you choose where and how to market your business, you should ask yourself who the likely buyer might be. For instance, will your business mainly appeal to industry insiders? Or is it – like a laundromat or general store – potentially accessible to the uninitiated?
Does your line of business demand special qualifications, or perhaps insist on license-holders?
And do you anticipate interest from an individual entrepreneur, a corporate business or a consortium of investors?
Though you may be unable to answer each question with complete certainty, the above process should help you define some of your likely buyer’s attributes.
Profile your buyer and it should be easier to write your advertising copy. After all, a copywriter should always write with their audience in mind – all the better for producing persuasive copy.
Link between price and buyer location
Read and consult widely to tease out any underlying trends in your market.
According to IBBA (International Business Brokers Association) research in 2014, for instance, 51% of those buying businesses valued between $500,000 and $1 million lived within 50 miles of the acquisition’s premises. And 32% of that sales volume involved buyers who lived less than 20 miles away.
Interestingly, as purchase prices rose beyond the $1 million mark, more distantly domiciled investors and rival businesses entered the market. And once prices topped $5 million, up to 77% of all purchasers lived beyond a radius of 100 miles.
How should you interpret those findings? Up to a ceiling of $1 million, you can expect to attract local entrepreneurs, possibly getting into business for the first time. They will probably have a limited pool of options, given they might want a specific type of business that is commutable from home.
Many could be termed lifestyle buyers: hands-on entrepreneurs who value the enjoyment of running the business and their work-life balance as highly, if not more so, as simply making money.
If your business-for-sale listing can include features like ‘accommodation included’ (as is often the case with guest houses), a healthy profit while closing at weekends, or an idyllic setting (as a campground for sale might offer), then it may well appeal to the lifestyle buyer.
On the other hand, if yours is a larger business, then potential buyers from farther afield might cast a colder, more commercial eye over your business. They will expect pristine and audited financial records and, ideally, sophisticated systems that produce detailed reports tracking profit margin breakdowns by client or product, and so forth.
For these kind of buyers, you should focus on the business’s attributes that are conducive to high and growing profits – within the constraints of confidentiality of course (ie, don’t give too much away until an NDA has been signed). Phrases like ‘high footfall’, ‘highly scalable’ and ‘scope for increasing occupancy’ will be music to these commercially-minded investors’ ears.
Protecting your legacy
Simply selling to the highest bidder seems temptingly profitable and straightforward. However, beyond money, many sellers want to secure not just their legacy but jobs for a loyal workforce.
If you care deeply about the fortunes of the business after the transfer of ownership, communicate this to your business broker at the outset. Make sure you understand the identity of any would-be purchasers before you enter negotiations.
For instance, you may discount a buyer if they lack experience in your sector or if they’re a competitor who you believe might wreck your company’s hard-won reputation.
Understand how buyers browse for businesses for sale
If a reputable broker is handling your sale you will doubtless have discussed a realistic asking price and been briefed on an advertising strategy. However, if you’re going it alone, then you should be aware of the following insights before you formulate an advertising strategy:
- Around 90% of all potential buyers browse online listings – so advertise on the internet, whatever else you also do
- Buyers attracted to a specific region may appoint local brokers, accountants and other professionals, conduct localized internet searches and scan local classifieds
- Buyers who know which sector they are targeting filter their online searches accordingly, browse trade publications and harness their network of contacts within the industry
- Buyers who are open-minded about sector and location tend to predominantly use online classified sites, because they can tailor their search by a multitude of variables and browse thousands of matching businesses, from around the world, in seconds. To do so, They don’t need to leave their office or have personal connections in far-flung locations or sectors with which they are unfamiliar
Melanie Luff is an Online Journalist for BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis. Melanie writes for all titles in the Dynamis Stable including PropertySales.com and FranchiseSales.com.