Getting The "A" Price
Did you know that only 20% of listed businesses sell each year, leaving the other 80% unsold? Buyers are out there, but they are looking for specific characteristics when researching investment opportunities. An "A" company will sell faster and for more money. Below is a list of criteria needed to make the "A" sale.
Quality Sales and Earnings
A business that demonstrates continual growth with a steady and improving history of sales and earnings will be more attractive to a buyer than one that is up, down, flat or decreasing. Stability indicates strength and consistency. The more consistent the operating history, the lower the
perceived risk, thus the price associated with the stream of sales and earnings is higher. An "A" business has consistent, long-term, positive earnings trends.
An "A" business which possesses a proven and stable management team has several operating advantages over a business that does not. The stronger and more established the management team, the less dependent the business may be on the talents and resources of the buyer. Lenders are more likely to support investors that can come in and take over a business that is thriving versus a business that has more potential for risk.
When a buyer is doing "due diligence," looking at the records for proper documentation is paramount. This is where the seller's good record keeping will pay off. Clean records give a prospective buyer confidence that the business is well organized, orderly, and thus easy to confirm information. The buyer and the seller can then have peace of mind and move to the negotiation stage.
Where the physical facilities are proportionate in size and cost to the business operations, buyers are more likely to invest in a business that has the proper real estate congruent to its cash flow. An "A" business will operate in a facility that fits its current and future growth potential. A business that has a high overhead can burden the prospective buyer with excess capacity/cost. On the other hand, if the facilities are too small or otherwise inadequate, the buyer may have to relocate to meet the future needs of the business. A potential relocation adds expense and risk to the purchase decision.
An "A" business should have some distinctive operating advantages over its competitors. This could be a superior location, a relative price advantage, the ability to provide above-average service or something else that can be clearly explained to a buyer. There are many good businesses out there that do a good job, but do not stand out from the competition.
Finding, training, and keeping good employees is a challenge. The best companies understand the need to attract and retain the best workforce suitable to meet and exceed the needs of the business. An "A" business will put priority on this process and will more likely get the sale.
Making the Grade
With more access to information on the internet and more savvy about the buying process, today's buyers are more demanding than ever when it comes to businesses that meet the "A" grade. There are obviously more elements to a great business than these alone, but a company meeting the above criteria will pass any buyer's scrutiny and be more likely to be the one that sells this year.
When you are ready to sell, trust the professionals at Business Brokers of Texas. We will consult with you about your goals and assist you in preparing to sell and finding the right buyer. Contact us for a no-obligation FREE 30-minute consultation.