There are many steps to selling a business. At Generational Equity, part of the Generational Group (Generational.com), we work methodically through each stage of the sales process to achieve our clients’ acquisition goals. A pivotal part of this process involves making a business ‘Buyer Ready’. Management guru Peter Drucker once said, “The buyer rarely buys what the seller thinks he’s selling.” This indicates that the features of your business that you think is the strongest selling point of your business may not be so to the buyer. Understanding a buyer’s mindset is key to achieving a successful sale. There are a number of things that buyers look for when analysing acquisition targets, these fall into three categories:
• Internal Preparation – Has the seller positioned the company for sale?
• External Orientation – Has the seller created a culture that looks outwardly?
• Sustainable Future – Has the seller anticipated the future and its changes?
Sellers should pay close attention to each of these elements when preparing their business for sale as these are critical to giving buyers confidence that the transition will be smooth when the owner exits the business.
It’s easy for business owners to become solely focused on the everyday operations of their companies, in doing so they often forget to develop strategies for their eventual exit. Ignoring internal preparation for your exit will put buyers off when it comes to your sale. These are just a couple of things you should be doing when making your business ready for a buyer.
Develop a solid middle-management team
Be sure to develop managers who can easily step into your shoes when you choose to exit your company. Finding an effective middle-management team who have the skills, drive and aptitude to show that the business will run smoothly once you are gone will give buyers confidence to invest.
Document what your company does well
As an expert in your company’s operations, it can be easy to forget that buyers are not yet on the same level of understanding. Developing operational documentation that shows what your company does well and what is unique about the process will help the buyer to see the expertise they are investing in.
A business that is ready for purchase will be continually evaluating where they stand in relation to their external environment. Your evaluation of the outside world must take into account where you are today and where you need to be in five years based on ever-changing circumstances. Your business can become ready for a buyer through ensuring the following.
Know your market position
Is your company a market leader in a strong position, or are you a smaller company with a lot of room for growth? A buyer ready business will be able to define their position in the market. Both have their pros and cons to different buyers but businesses that are ready to buy will be constantly evaluating these questions.
Who are your customers now and in the future
Businesses that are ready to buy will regularly review the needs of their customers and analyze how effective they are in reviewing their current and future needs. They anticipate how the customer’s needs will change and plan accordingly.
Developing a brand that identifies you
Buyer ready businesses will have name recognition in their market (and a reputation that follows). It takes years and years to develop a recognized brand and businesses that are ready to sell will have been doing so from day one.
Buyers aren’t acquiring your past, they are buying your future. They are looking for signs to show that your future earnings can be grown beyond internal projections. A buyer ready business will know this and document plans to create growth.
Develop revenue streams that are recurring
Businesses that are ready to be sold look for revenue streams from guaranteed contracts, long-term customer relationships and product uniqueness to sustain their growth. Buyers look for revenue that will exist after the owner departs. Develop those sources of revenue and document them.
Assess and insulate your organization from future threats
Constantly scan the horizon to determine where the next threat to the market, industry and organization may come from. The more you can make your organization, products, and processes unique and innovative, the better you will be insulated from future threats. This will give buyers an added layer of confidence in the future.
Diversify your customer and supplier base
Having too much revenue generated by one client will be a concern to potential buyers. Be sure to look for new clients all the time. Similarly, you may find it convenient that most of your materials come from a single supplier. Buyers will be looking for a solid supply base that’s not overly dependant on a particular source or region.
Promote and reward your best innovators
Look for the innovators and risk takers in your organization and reward them for their ideas. Buyer ready businesses have a body of innovators in their midst that buyers will appreciate.
Owners of businesses that are ready for sale know exactly what buyers are looking for because they have been preparing their organizations to be buyer friendly from day one. If you decide that you want to exit your business, you need to make it ready to buy before you even think about that decision. To prepare your business for sale, you must position the company for sale internally, create a culture that looks outwardly and show that your future earnings are solid. By following these guidelines, you can be on track to creating a buyer ready business.
To find out more about how to make your business ready to buy, download Generational Equity’s free whitepaper ‘Building and Exiting a Desirable Business’ written by Generational’s President, Ryan Binkley.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
Generational Group’s affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Group to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Group is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Success, you have been added to our list.