10 things a Business Buyer is Looking for in a Business
Another question we are often asked is, “How is the market for a business like mine?” Usually our response to this questions is, “there are many more qualified buyers then there are “good businesses!” Which of course raises the question, “what are buyers looking for in a good business?” Here are a few things to keep in mind that help to answer this question.
- Provable books and records: Get your “house” and financials in order.
- Reasonable price: Everyone wants a “good deal”.
- Leverage and terms: Much like when buying a house, buyers are used to putting down a certain percentage of the purchase price and financing the rest.
- Living wage: Particularly an “economic” business buyer needs enough cash flow to support their families.
- FF&E (current FMV, not overstated): Furniture, Fixtures & Equipment need to be on the books at a fair & reasonable price for their age and condition.
- Appearance: Yes, even businesses need “curb appeal”.
- Lease (reasonable term and cost): The lease is a big deal, particularly for companies where the location is critical to the business. Being able to get an acceptable new lease or have the old lease assigned to the business buyer is of the utmost importance. If acceptable terms cannot be reached in regards to the lease, then that could mean “No Deal”!
- Training (1–6 months, negotiable): 2-4 weeks are generally part of the deal. Any more than a month should be compensation for the seller. There is also an opportunity here for a consulting agreement.
- Covenant not to compete: This usually has to do with “time and distance”. The business buyer does not want the seller starting a similar and competing business right around the block.
- Good reason for sale: For an age appropriate seller, retirement is a great reason. Reasoning like, “this business sucks and is killing me,” is not a good reason and would drive away a potential business buyer.