6 Business Sales Facts You Need To Know
Updated: Mar 23, 2020
1. Buyers won’t pay more for potential.
If a business is simply a concept without a proven revenue stream, then there isn’t any value in the eyes of the of potential buyers.
2. Buyers are interested in profits, not revenue.
The only number that matters is the profit a business
Business 1: £30,000 monthly revenue, £25,000 monthly expenses, £5,000 monthly profit and £60,000 annual profit
Business 2: £10,000 monthly revenue, £1,000 monthly expenses, £9,000 monthly profit and £108,000 annual profit.
The monthly revenue for the first site is three times more than the second business, but the actual profit is almost half. Acquirers want to see profit numbers, not revenue.
3. Buyers expect verifiable financial claims.
If you are going to claim revenue from a specific source, you need to have verifiable proof. For example, if you are selling advertising space directly, be prepared to show invoices as well as bank statements that show matching deposits.
4. Don't live in the past.
The previous success of a business is largely irrelevant at the time of sale. Buyers are interested in recent performance (usually the last 12 months) and future sustainability and viability. Business owners are not interested in fixing and recovering your business, especially if you are expecting them to pay a premium. However, don't be afraid to show previous years if the business has been growing steadily. Buyers love to see growing revenue and profit figures, especially if you have already made future plans for the business that seem realistic based on past performance.
5. Honesty is the best policy.
The truth is going to always surface, so be upfront about everything from the beginning. Buyers understand that every business is going to have positives and negatives. There is no such thing as a perfect business. If you are honest and transparent from the start, there is less risk of a deal going sour because the buyer uncovered something during due diligence that wasn’t accurate or an instance where the truth was stretched. Honesty is the best policy in all business transactions and selling any business is no different.
6. Expect to answer a lot of questions.
Never judge a buyer. You never know who you are dealing with or the buying power they possess. Someone asking what appears to be a simple question could potentially be a buyer that is new to the specific industry and have deep pockets for investing. Experienced buyers will often hammer the seller with questions to turn up inconsistencies and red flags. To help business owners, our team at NOVUS Business Brokers will be on hand to prepare you through this process.