Buyers' Top Concerns – People and Profit
Selling your business is always easier when you understand Buyers' fears and desires. According to the Q2 Market Pulse Survey Report* Buyers purchasing businesses in the $2M and under Asking/Purchase Price range were most concerned about employees, specifically longevity, loyalty, and work ethic of employees. For Buyers in the $2M to $50M price range, financials barely edged out revenue and Management Team/Key Employees for the top spot.
People and Profit are essential to Buyers. In our current pandemic environment hiring and retaining employees is a quickly changing landscape with an unpredictable horizon. Profits have been impacted by factors outside of the control of owners and leaders who are thirsty for more stable revenues leading to more reliable profits. These struggles are driving businesses to shift their growth strategies to include the acquisition of other businesses to fuel their growth.
People: The value of your business to an acquirer increases if you have a workplace culture that creates engaged employees who care about the results of their work.
Purchasing a ready-to-go, reliable source of employees is often far easier than hiring and training them over time. The employees that you’ve invested in, trained, nurtured, and retained are a key factor that acquirers consider as they complete their due diligence. As you engage with interested Buyers be sure to discuss your workplace culture and share what you and your employees value.
Give examples of how your employees add value to your company and customers, and the reasons you believe your employees choose to remain a valuable part of your business. Until you sell, be attentive to enhancing the talent in your business and putting in place managers and key employees that can operate the business in your absence.
Profit: Acquirers don’t limit their focus on profit to how much money your business has left over at the end of the year.
Your business may be much more profitable in the hands of an acquirer. By adding the resources of your business assets, people, products, and services to their existing business an acquirer might easily surpass the profit margins you experience. Acquirers might desire what you’ve created whether you’re profitable or not. For example:
- Your customers may provide ready access for an acquirer to sell more of their products and services. Or, you may have a key customer relationship that is highly desirable.
- Your physical marketplace may be cheaper to buy into through acquiring your business than it is to go into competition for it.
- Your products and services may give their salespeople more to sell to their existing customers.
- Your key supplier and vendor relationships may be highly desirable, but not readily available to an acquirer, or they may achieve volume discounts by combining your orders with theirs.
When it comes time to sell your business, keying in on the market preferences of Buyers will help you position your business for maximum value. There are 8 Drivers of Value that Buyers look for and you should know how your business scores in each of them. Get your Value Builder Score and ask for a confidential conversation about the value of your business.
*The Market Pulse Survey Report is a quarterly report by the International Business Brokers Association and M&A Source based on surveys conducted with business brokers and M&A advisors.