If you are looking to buy or sell your business, perhaps your starting point is perfection. But what is perfect? As they say, beauty is in the eye of the beholder. However, if you are considering buying or selling a business, the following items would probably feature in the “Perfect Business.”
The perfect business is one with the following attributes:
1. A reasonable price.
2. A reasonable down payment (hopefully about 20% of the full price).
3. Some seller financing.
4. Reasonable sales (hopefully increasing each year).
5. Discretionary Earnings of $60,000 per annum or more.
6. A compelling reason for the owner to sell.
7. A desired industry type.
8. Clear processes and procedures so the buyer feels they can take over the operation of the business.
9. Accurate and uncomplicated financial records.
10. Good and attractive location (if important for the business type).
If you are the owner of the business and wish to sell, try and have as many of these things in place to attract the right potential buyer. Bear in mind, that according to the California Association of Business Brokers it takes about 8 months to sell a business, but of the businesses on the market, only about 25% eventually sell.
If you are the potential buyer of a business, before you start looking at a business to buy, get your personal situation in order so you present strongly to the seller.
This means getting together a clear resume, checking your credit report is clear of any errors, your credit score is strong (hopefully a FICO score of 700 plus) and a personal financial statement that shows you have more assets than liabilities.
Finally, remember the Golden Rule. The Golden Rule is to put your feet in the shoes of the other party. If you’re the seller of the business, see things from the buyer’s perspective. If you are the buyer, see things from the seller’s perspective. If you can do this, your chances of closing the sale are greatly enhanced.