WHAT DO BUYERS WANT TO KNOW ABOUT YOUR BUSINESS BEFORE MAKING AN OFFER?
When it comes to selling your business, you need to be open, upfront and honest with all aspects of its functioning as it will be reviewed in meticulous detail and scrutiny during the due diligence process.
Buyers prefer low risk with high reward when they consider investing in small business. Ultimately, buyers will look for good cash flow and solid systems with the potential for further growth.
Buyers need accurate and complete information to make an informed decision on whether your business is suitable for them. You can help this process by understanding who your potential buyer is and what they may want to know about your business.
Key points when evaluating a business prospect
A buyer will want to know a summary of your financial performance
Potential buyers will likely want to view at least three years of financial statements, including income statements and balance sheets. They’ll be buying into your business’s future profitability, so explaining any differences between what the finances are showing now, and what they could be showing in the future is vital.
Balance sheet review
It is essential to gain a detailed knowledge of the balance sheet during diligence. This point applies equally to sellers as to buyers. Balance sheet diligence should help to identify issues that are only identified post-completion when the completion accounts are being drawn up.
Customer and contracts review
A buyer will also examine your customers, contracts, and service lines to determine where the value in your company lies and to determine which service lines are growing and which are contracting.
Internal and external suppliers
There should be an understanding of the total cost of ownership of the current suppliers, allowing buyers to complete an evaluation of the sellers most valued suppliers which could identify potential savings and negotiating new agreements where applicable.
Operational and organisational overview
A careful review of your company’s operational and organisational model is an important step in mitigating serious change management challenges during the transition period. These include structures, processes, and people to deliver the promised value of a merger.
Sales pipeline and forecast for 1 to 3 years
An in-depth evaluation of your company’s key sales drivers may indicate a big opportunity for unlocking significant revenue growth, or it may find the revenue projections used in the valuation are unlikely to materialise.
When providing this information, you need to remember that it is about synergies and the buyer is looking through all your data and information to understand how he can help improve the profitability of your business or consolidate your business with another and the synergies he can derive from that.
To ensure that our clients receive a high quality of service and a deep insight, we start the process with a Transaction Readiness Report. A business will move one step closer to being sale-ready by focusing diligence on the key elements of your business. This, combined with the creation and implementation of a strategy to mitigate and/or remediate problems before bringing the company to market, will improve the chances of a successful transaction that maximises value while minimising risk.
Venture Corporate Finance’s Transaction Readiness Report aim to help you to fully understand whether your business can be sold at the valuation you are looking for.
WOULD YOU LIKE A TRANSACTION READINESS REPORT FOR YOUR BUSINESS?
A review session to understand more about the Transaction Readiness Report and how it can help support any future decisions on selling your business.
Venture Corporate Finance is a middle-market M&A advisory firm for clients planning to sell their businesses, raise capital, restructure, or grow with acquisitions. We provide independent advice and bespoke transaction solutions to meet their specific objectives.
For more information on corporate finance and M&A services, contact Venture Corporate Finance.