Buyers and Sellers are in Competition for the Price of Your Company

Selling your company is not the same as running it. To sell your business for its actual value, you must understand the mind of the buyer.

A buyer has a checklist that he uses to measure whether your company is a viable investment. The buyer's perspective is objective, data-driven, and analytical.

First-time sellers are vulnerable to being taken advantage of by sophisticated buyers. When the seller doesn't understand what a buyer looks for inside a company, the buyer will devalue, degrade, and discount the company and the final sales price.

Even as a first-time seller, you can learn what buyers look for in five crucial areas inside your business. It's called the Growth to Exit® process. 

When you look at your business from a buyer's perspective, these five areas are critical:

1. Legal – Ensure the appropriate legal framework within your company appeals to investors because it helps them transition the business with fewer problems. It is vital to have an expert review your contracts and the contract process, analyze your corporate governance policy, and manage any current and potential risks.

2. Finance – Financial records are among the most critical factors in evaluating a company's past performance and future growth prospects. It is not enough to be a profitable business – you need to show Business owners should have balance sheets, income statements, cash flow reports, and other relevant documents prepared before entering the market.

3. Human Capital – If the correct people are not in place within your company, buyers will see this flaw, and your business will have a perceived decrease in value. Buyers look for companies with the correct structure and allocation of human resources to ensure a smooth transition. A great way to show buyers that the company is in good standing and will continue to grow successfully is to maintain a low employee turnover rate and keep morale high.

4. Sales, Marketing & Branding – Any transaction requires the correct marketing strategies to yield successful returns. Before entering the seller's market, you should know how you position your company and establish a strong brand to carry over into the new owner's plans for the business.

5. IT/IP Systems – All systems within your company should be up-to-date by the time you begin the selling process. This includes using the latest operating software within your industry, comprehensive data security measures, and having the appropriate disaster recovery plan in place. The more you protect your business now, the more buyers will be willing to pay when you're ready to sell.

The Bottom Line

When a buyer or investor is interested in your company, he has a checklist to determine whether he should move forward. Is there a potential for growth in the market? What inefficiencies exist within the company that limits its growth? Are the right people, systems, and processes in place to expand the company in the marketplace? Is growth sustainable?

These are just some of the questions the buyer is trying to answer when considering your company as a new acquisition. You may not have control over the marketplace, but you do have control over how efficiently and smoothly your company operates inside that marketplace. When you shift your perspective to a buyer's mindset, you will discover your company's weak areas that can be upgraded before a buyer ever steps into the picture.

You regain control over the selling process, and you become confident in your company's actual value. The price competition occurs on a level playing field, and the outcome becomes more aligned with your goals.

To learn more about creating a strategic exit plan, please visit GrowthtoExit.com. Over 12 weeks, we teach you what a buyer looks for inside a company and the steps you can take to ensure the buyer likes what they see.

Your company is the product. Growth to Exit® is the process. The buyer is your customer.

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