Small Business Buyer’s Typical Wish List
Although “wants” and “needs” can vary from buyer to buyer, generally speaking, small business buyers have some common items that they look for when searching for a business to purchase and when found make for an overall more seamless business transfer process…
A buyer wants:
- A solid business – Although that phrase may be somewhat subjective, buyers are searching for stable companies with a track record of success. The savvy buyer approaches the situation just as a lender would: requiring a history of financial data that is able to be verified. Filed tax returns are the preferred record for conducting due diligence, and should match fairly closely to the year-end P&L statements. It is also important that a business be established. Most lenders require a minimum of three consecutive years of financial history and prefer that the company was under the same ownership (the current seller) for these three years.
- Reasonable seller expectations – This comes into play at the first moment a buyer begins looking at a business for sale. Does the seller receive an adequate income from his company? Are his revenues increasing or, in this economy, at least staying consistent from year to year? Is his business priced appropriately? Will the seller consider offering some financing?
- Disclosure during the due diligence phase – Buyers assume sellers will share the items requested in a timely fashion and be able and available to answer questions or present further information when necessary. Courtesy and common sense should prevail during this delicate phase of the business transfer process.
- A smooth closing – Just as the seller wishes, the buyer also wants the closing to be a positive experience for both parties involved. It is a time of celebration, not a venue for uncertainty, debate or hesitation. Closing attorneys experienced in the business transfer process assist immensely with a seamless closing. By the time everyone is seated at the closing table, all questions should have been answered, all pre-closing paperwork completed and the buyer and seller should be confident this is a win-win situation for everyone involved.
- A seller who stays involved (for a while) – While a typical buyer probably has some new ideas for the business, almost all buyers want training and initial support from the seller and/or the seller’s management team. Buyers want to be successful and retain employees and customers wherever possible and practical. Buyers look for sellers who will spend a week or two showing them the ropes, and buyers are especially appreciative if a seller remains available at a later date should an unexpected question arise. Buyers generally do not want sellers to be involved for a long period of time, unless seller relationships with key customers will take time to transfer and consequently they have presented the seller with an offer of employment. A buyer wants to feel comfortable and prepared as they assume control of their new enterprise.
My experiences working with buyers and sellers who are transparent, reasonable and agreeable have been the most enjoyable and produced the most successful closings. When buyers and sellers have realistic expectations — initially and throughout the business transfer process — and maintain a professional and positive attitude, they typically find the transactions to be pleasant and seamless.
Courtesy Murphy Business & Financial Corp.