05 Sep Around the Web: A Week in Summary
A recent article from Axial entitled “What Not to Do When Submitting an IOI” explains the common actions (or lack thereof) that frequently cause buyers to be overlooked by sellers and bankers.
When it comes to submitting an IOI, or Indication of Interest, there are a number of guidelines that are expected to be followed. In most scenarios, the banker will provide their specific preferences in regards to what should be included in the IOI. A quick way to find yourself dismissed as a potential buyer is to disregard any of these preferences or to fail to find them out before putting together your IOI.
Before submitting your interest, actually do a thorough due diligence check on the business in question. Failing to do so will show in the later steps of the process. Additionally, it is always a good step to introduce yourself to the banker early on and ask them some questions regarding the sale. This establishes a connection as well as shows that you are showing up and doing your research. Every step along the way, it is important to distinguish yourself as a buyer by showing an attention to detail, organization, and that you are taking the process seriously.
A recent blog post from BusinessBroker.net entitled “Important Financial Information” explains the different financial factors that business buyers need to understand.
Clean, concise and complete financial records are an important piece to any business transaction. As a buyer it is not important that you understand absolutely everything regarding finances, just that you know where to get the information. It is important to lean on accountants, tax professionals and lawyers when you are evaluating as well as preparing to take over a new business. Working with a business broker as well can help to guide you through the processes.
A recent article from Forbes entitled “Nine Strategies To Help You Increase The Value of Your Business” explains the reasons why many businesses may be worth less than the owner believes, and how to remedy each potential problem.
It is not uncommon for a business owner to believe that the value of their company is directly tied to either the revenue or profits that the company brings in. However, this is not the case. Ultimately, the value of a business is equal to what a buyer is willing to pay for it. In order to increase the value of your business, you must make it both attractive to a buyer and ready to be bought. To accomplish these two goals, follow these tips:
- Create a business that is independent from the owner. The more necessary you are in the operations, the less sale-ready your business is.
- Make sure you can show buyers a proven process that can be replicated in your absence in order to generate the consistent revenue that you are showing them is being brought in.
- Have a solid management team in place that can maintain the business operations through a transition.
- Ensure that your business has a well-known, respected and popular brand.
- Showing some form of recurring revenue, whether that’s via subscriptions, service contracts or other agreements that show guaranteed future revenue will do wonders for the value of your business to a buyer.
- Be able to show a buyer that your business is on a growth course by illustrating momentum backed up by multiple years of past growth.
- Have clean, accurate and concise financial records.
- Show your potential buyer that you have a diverse customer base. Having the majority of your revenue coming from one or two main clients is high risk and does not look good for a buyer.
- Show buyers what is unique about your company and makes it stand out from the crowd. This could be in the form of location, relationships, contracts, technology or processes.