“Doing the right thing is not the problem.
Knowing what the right thing is – that’s the challenge.”
-Lyndon B Johnson
Over the years, we have closed several deals and worked closely with thousands of business owners, buyers and investors. During this period, we have observed that several best practices are applied by successful business owners who not only get the maximum inquiries, but also close deals faster. Here, we curate these best practices and share them with you. As you will soon discover – most of them are simple to understand and easy to implement. Let’s get started!
We have divided the best practices into two stages. The first stage is before the interest is generated from the investors for your business and second stage is for after the business has generated interest from investors and companies. Both stages are equally important for a successful deal for any business.
A few keywords used in this article:
Buy-side means prospective buyers/acquirers, investors or their representatives
EBITDA means Earnings before Interest, tax, depreciation, amortisation
Due diligence means an investigation of a business or person prior to signing a contract
Best Practices – Preparation Stage: At this stage, you are just about to go or have already gone live on indiabizforsale with your business opportunity. You are filling in the relevant information, and encapsulating your business details in the opportunity. How can you create a powerful opportunity that gets attention of the right buy-side prospects? How do you get them to land on your opportunity among the thousands others?
1. Give a Detailed Description: Remember – the more the information in the page, the more powerful will be the SEO (Search Engine Optimisation) of the page in google ranking. However, it is not enough to just write more. A good description has two major components – 1) right keywords to enable maximum SEO landings 2) right information that paints a clear picture of the business opportunity and gets a buyer/investor interested.
Example: If you own a pharma business, your keywords could be – ‘pharma manufacturing’. ‘manufacturing and distribution’ ‘GMP certified’, ‘ISO certification’, ‘pharma business in Ahmedabad’ (or any other location), ‘profitable pharma business’, etc.
2. Display Positive Content: The description that you write for your business should be written in a positive light to attract the interest of onlookers. Now, this does not mean that you need to write things that are not true. However, it is perfectly possible to be honest and real and still keep the content positive.
Example: If you are selling a garments business that is yet to break-even, but you believe that the business has future potential, you can write – ‘an established garments business with high profit potential based in Mumbai.’
3. Stick to the facts: False information, for e.g. old pictures of your business, pictures of another business, false data (e.g. profit making vs loss-making), hiding the real reasons for selling the business, etc. may attract some initial interest but would never lead to ultimate deal success.Share the facts upfront; it may generate low interest but those few who show interest might be more solid leads that are more likely to convert into a successful deal.
4. Communicate Better with High Quality Images: Put up high resolution images (preferably professionally taken photographs of your office, factory, plant etc.) & pictures without revealing the identity of your business or of yourself. As they say, “a picture says a thousand words” – by using real and good images, you can generate spontaneous interest for your business opportunity.
5. Be Realistic While Quoting a Price: Did you know? Unrealistic valuation is one of the top reasons for deals not emerging on the plate. Your asking price must be comparable to the benchmarks in your industry (i.e. other companies of your size), must reflect the past 3 years of your business performance, and must factor in growth potential of the business over the next 3-5 years. Remember, that while buyers/investors put money in a business for future, they evaluate the business based on its performance in recent past and present, i.e. the current year and last 3-5 years.
6. Be prepared: Before getting acquired or funding, businesses go through several diligences by the other side. Such as A) Business Diligence B) Financial C) Technology D) Human Resource(team) E) Legal/compliance/IP. As a business owner, one should be prepared with the paperwork such as a business plan (growth 3-5 years), financial modelling, long term client contracts, financial statements for previous years, bank statements of the current year, key employee contracts, valuation report, etc. You should invest into getting your business prepared for the possibility of best outcome quickly for your business. The money spent on the same will save you a lot of headache, time and frustration, and improve your chances of closing a deal by manifold.
Best Practices – Inquiry Stage: At this stage you have already started to receive inquiries from buy-side, but are yet to come across suitable buyers or yet to get any visibility of a deal emerging on the plate. How can you fast track your journey? How can you keep the right buyers engaged and let go of the ones that don’t match your objectives?
1. Respond Promptly: Once your business opportunity receives an inquiry, respond in a timely and professional manner. First impression counts: When you reply in timely and professional manner, the good impression is also created for your management style stroke your business opportunity. For some reason, if you had been travelling or had an emergency at home and could not respond on time, reply as soon as possible and begin with a note of apology to show that you are serious.
2. Manage Communication Carefully – Before you share too much, learn as much as possible about the prospective buyer / investor who is interested in your business opportunity. Who are they? Where are they located? What role are they playing currently? Why are they interested? What resources do they have at hand (i.e. funds, team, technology, skillset etc.) to buy / invest in your business? Whether it is a consultant or a direct buyer / investor, learning more about them is critical to decide when to share and how much.
Things to remember when contacting buy-side:
Phone Calls- we recommend that you call from the mobile/landline that is not usually used by or associated with your company.
Confidentiality- do not reveal your / your business’s identity immediately – be comfortable with the other side first.
In-person Meetings- select a neutral place for the meeting that allows you to have discussions in private- especially, if the buyer / investor is also from your area or region. Coffee shops / restaurants / hotels are mutually convenient locations for the first meeting.
3. Share Top-line Information First: Asset information, Financial Summary (i.e Sales revenue, Profit before or after tax, EBITDA, debt / liabilities etc) are generally safe to share initially for the buy-side to evaluate if your business matches their preferences or not.
4. Make the Most of Technology: Use the messaging interface at Indiabizforsale.com, email communication, secured google drive/dropbox, etc. to share documents. Having a documented trail of all communication exchange can help in any unforeseen circumstances.
5. Stay Positive and Hopeful: Finding a right investor/acquirer requires patience – it is like running a marathon. Since it is often time-consuming, stay positive in your communication on the platform and off the platform and try to remain hopeful in general.
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