If you read Seller Pricing Part 1, you got an introduction into how the market decides the value of your business. Now you know what to expect even after the valuation process.
Just because you think your business will be worth one amount, doesn’t mean that’s the price you will be able to put together a deal for. But, it’s certainly a number to shoot for. Knowing about how the market values a business can help you create mechanisms for increasing your sale price.
Let’s look at how some of the lessons you learned in part one can translate into real-world decisions that lead to sales at market value.
Always Ask for a Terms Sheet
When someone approaches you with an offer for your company, make sure you get the deal in writing. There may be factors to the deal, other the final sale price, that make the offer better than others on the table.
Always ask potential buyers for a terms sheet that spells out their intentions. Then go through the details carefully and look for places where you believe the deal can be improved to meet your expectations.
Demonstrate Your Company’s Future Growth
The biggest thing you have to prove to potential buyers is that your company will continue to make money long after you are gone. That means you’re going to need to prove that there will be a revenue stream coming in the door.
Talk to your current customers about agreeing to recurring contracts that can secure your future growth. These deals, while maybe just handshakes, can go a long way towards showing a potential buyer that the business they are investing in isn’t risky.
Give Your Company Emotional Value
If you’re just advertising your company as a grouping of assets or an array of intellectual property, then you’re missing out on sharing a large portion of your business’s value with potential buyers.
People want to see what your company is really like. They want to get to know your employees and hear the story of how your business came into being.
Consider sharing the emotional factors involved in the sale of your business with potential buyers. It will help them see that this transaction means more to you than just the money, it’s a way for your legacy to continue long after you retire.
Show Them the Comps
If you’re lucky, when you go to sell your business there will be enough similar companies out there on the market that you will be able to show realistic comps to potential buyers.
You also want to hope that none of those comps are too similar to your business that the buyer can no longer see how you have a competitive advantage.
Showing buyers comps for your business can feel like walking a fine line. You may want to consult with your business broker to ensure you’re making the right decision.
Creating a Rational Atmosphere for Purchase
The final ingredient in the sale of a business is a rational transaction environment. Both parties need to feel like they are on the same page and ready to take on the sale.
That means talking through all of the details well in advance, reviewing comps, talking about the competitive advantage of your business, giving the buyer a firm foundational understanding of how your company came to be and familiarizing them with your staff and processes.
All of these parts of the process take time, knowledge, and finesse. It’s important that you walk your new buyer into the details of the situation so you don’t scare them off. I can help you close the gap between interest and sale. Contact me today for a free consultation.