| Buyer Expectation | Recommended Seller Action |
|---|---|
| Reliable, Well Organized Systems and Financial Documents: Proof of the sales, profits and discretionary earnings of the business. Systems on which the business runs. | Clean Up Your Financials: Ensure financial statements are comprehensive, accurate and accessible. Collect on any past due accounts. Collect loans to officers. Invest In Taxes: Usually, buyers will value your company at a multiple of pre-tax profits. Carefully guard the benefit of discretionary expenditures. Only capitalize appropriate purchases and pay for all personal expenses yourself for at least one full accounting year before placing your company on the market. Have Your Accountant Prepare Reviewed Financial Statements: Audited statements are better than reviewed but are not necessary for most mid-sized companies. Buyers rarely have regard for compilations. If they are all you have, be sure that they match your corporate tax returns. |
| Credible Valuation, Deal Terms and Potential to Attract Investors and Financing: Buyers often will not look at a business that is not priced competitively. | Consult A Merger and Acquisition Professional Intermediaries with experience have the ability to help you understand and maximize the value of your business with almost no disruption to your workflow. Make sure that the firm or person you select is knowledgeable and specializes in selling companies of your size and in your industry. Be Realistic about Valuation and Flexible on Deal Terms: Flexibility often leads to the best outcome. |
| Lack of Owner Centricity: How effectively can the business operate without the current ownership? | Develop Depth in Management: Hiring, training and onboarding is expensive and not always successful. Buyers need to know the quality of your management team. |
| Furniture, Fixtures, and Equipment: Provide a complete list of the equipment with values, and make sure all is in working order condition. | Have Your Equipment Appraised: Equipment should be appraised at fair market and orderly liquidation values. |
| Opportunity to Purchase Real Estate: Real Estate sold with the business makes it easier for the buyer to secure financing. | Have Your Real Estate Appraised: A fair market bank appraisal is usually adequate for land and building. |
| Lease (If no Real Estate Transaction): Buyers want fair lease costs and terms. This could include an assignment of an existing lease, or a new lease. | Understand Building Owner Expectations for the Lease: Make the lease transition as easy as possible for the buyer. |
| Appearance: Make sure the facilities are clean and presentable. | Clean Up the Premises: Time and again, studies have shown that aesthetic value contributes favorably to employee performance and creates a good impression. |
| Training: Most buyers will want baseline training included in the purchase price. | Offer Training and Paid Consulting: Transition training is included with the sale, and paid consulting can follow as needed. |
| Covenant Not to Compete: A written promise not to compete within a certain distance and time frame gives the buyer assurance that the previous owner will not compete for the employees or customers. | Determine an Acceptable Non-Compete: Purchase price can be allocated to Non-Compete, and this can potentially reduce tax liability. |
| Reason for Selling: Buyers are usually concerned and need assurance that the business is not being sold because of an undisclosed fact that could hurt the business in the future. They also want to understand that all owners support the sale of the business. | Clearly Articulate your Reason for Selling: Candor will reduce buyer concern. Purchase Minority Interests: To prevent differing shareholders from contesting your transaction, buy out any minority interests as soon as possible. |
| Prompt, Professional Communication: Time is of the essence. Prompt offers with the proper contingencies and prompt responses are important. | Treat the Buyer with the Same Respect You Appreciate: Be responsive. Sellers and Buyers work together, through intermediaries, to make a deal. |
| No Surprises: Full disclosure is always the best policy. If the facts are disclosed up front, almost any problem can be overcome or solved in negotiations. | Be Forthright and Honest: Mistruths will be discovered during due diligence and will likely damage the sale process. |
| Current Inventory: Buyers will be hesitant to purchase old inventory. | Sell or Divest of Old Inventory |
| Growth Opportunities: Buyers want to see “blue sky” ahead for the business in terms of revenue and profit growth potential. | Provide List of Opportunities with Financial Projections: Suggest and quantify several initiatives on which a new buyer can embark to expand the business. Consult with your M&A advisor to build the story. |
| Documented Processes: Easily understanding how the business operates is important to the buyer. A business is a series of repetitive processes that generate a profit. | Create Process Maps: Map all key processes across the business to enable the buyer to transfer knowledge and easily step into managing the business. |
| Lack of Potential Liability: Buyers are concerned about historical and potential future liability. | Reduce or Eliminate Successor Liability: This has been a growing concern among buyers in recent years and has even become a primary dead weight in negotiations. Pension plans, environmental hazards, and obligations to former employees are things to focus on. |
How to Prepare Your Business to Exceed Buyer Expectations
