Most business owners are hopeful that once the business is “on the market”, a steady stream of ready, willing and able buyers will be falling over themselves to buy their business. This situation does occasionally happen, but it’s not the normal scenario.
At Verified, we prepare a full professional Information Memorandum (IM), which usually runs to over 15 pages in which we outline all the features and benefits of the business. The IM includes the valuation methodology, and at Verified we have our own certified business valuer, which gives added credibility to our valuation figure. Before we give this IM to the potential buyers, we have them sign an enforceable Confidentiality Agreement (CA) and carefully qualify the buyer to ensure they have the ability to fully fund the purchase if they proceed to a contract.
The time taken to sell a business is difficult to predict unless we, at Verified, have a buyer who has specifically asked for a business like yours, which does often happen. We have a database of nearly 6,000 potential qualified buyers, one of which may be the ideal buyer for your business. We email every one of these buyers when we first list your business for sale. We’ve found in the past that emailing the complete database of buyers can then result in a buyer contacting us through referral from a friend on our database.
If you have a HOT business that has excellent profitability and is well priced to meet the market, chances are we’ll have it sold within a few weeks. Several buyers on our database are in this category; they don’t care what the business is, just so long as it’s highly profitable and priced correctly. We’ve sold fabricating businesses to buyers who have never had anything to do with fabricating before, electrical contracting businesses to non-electricians, hairdressing businesses to buyers who couldn’t cut hair to save themselves! Some business buyers are unconcerned about the category of business, so long as the business has sustainable profit and the potential to grow.
Some businesses will take longer to sell than others for a variety of reasons:
- A very small market for that category of business, i.e. hydraulic engineering businesses where very specific qualifications are required.
- Very little demand for that category of business, i.e. newsagencies, which were once a hot business but have declined significantly in recent years.
- Located too far from where the buyer lives.
- Unattractive operating hours (7 days a week).
- Short lease on the premises.
- Demolition clause in the lease.
- Over ambitious price expectations by the seller.
- Hard to obtain finance from banks for the category of business (all goodwill, very little plant & equipment as part of the purchase price.
- Not being advertised or exposed to the market sufficiently.
- Rubbery financials i.e. the figures just don’t ‘stack-up’.
- Brand new multinational competitor starting in close proximity (i.e. “Officeworks” opening near a stationery business).