One of the reasons people enjoy working with us is knowing that the buyers we bring to the table are financially qualified. We’ve done our part to make sure that we aren’t going to introduce you to people who just want to kick tires.
But being financially qualified is only part of a successful transaction. Buyers also need to be mentally serious about buying your company, and there are some clear indicators you should keep in mind when meeting prospective buyers.
Serious buyers will have at least some level of interest in your industry. They will seek not just to understand the industry as a whole but will look at the specifics of your business, be it your existing customers or prospective ones.
They’ll also be interested in a SWOT analysis, particularly in O – Opportunities and T – Threats quadrants – to help them contextualize whether what they bring to the table can help accelerate where the company is already going. Serious buyers will go beyond the basic financial questions and get to the why of your business.
Discretionary costs refer to spending on things like advertising, research and development, and public relations. Mature businesses may be on cruise control and have scaled back or even eliminated some of these costs, but serious buyers will be concerned to not see some level of spending in all of these categories.
In today’s marketplace especially, clients and customers aren’t to be taken for granted, and these discretionary costs are seen by serious buyers as ways to stay ahead of the curve and not be complacent. R&D, in particular, can help firms not just wait for the next innovation, but create it themselves.
Staff and Wages
A serious buyer will want to speak to your senior staff, if possible, to find out how invested they are in staying with the firm if you leave. Most times the need for confidentiality won’t allow for those conversations, but what a serious buyer will be looking for in those cases are:
Wages – are they at a market rate and what expectation do your staff have that they will grow?
What about benefits?
What is morale like in general?
What is the culture that drives that morale?
If people are there due to the social capital you’ve earned with them, and you leave, does that mean they will too?
This last point only applies to companies that have inventory, but it’s important to make sure that you have a realistic and detailed inventory. Serious buyers will target old and unusable/unsellable items and ask for them to be removed from the value of the business.
This gives you an opportunity to do some preventative maintenance and get rid of that stuff yourself before it’s time for a sale. It will only give more confidence to buyers that they’re dealing with a business that has something as basic as inventory handled.
We know what serious buyers look like and can save you the time from having to try to identify them yourself while running your company. Give us a call to see if we can help you with your exit strategy.