As a small business owner, it can be challenging and confusing to understand how to sell your business, especially if this is your first time. Over the last few years, we have supported thousands of business owners in the journey of selling their business, and have found that one of the most common questions that business sellers have is this – how to identify potential buyers for their businesses?
In this article, we bring to you the key insights we have gained through our platform on the essential aspects to be kept in mind when identifying a potential buyer for your business, and how to go about the overall deal-making process.
Identifying Your Target Buyers – Streamline Your Efforts
When it comes to buyers, we have seen many sellers waste their efforts by reaching out to the wrong target audience. It is advisable to start your buyer-identification process by profiling the ideal buyers from your business. For example, are you looking for individual buyers, institutional buyers or both? Are you only looking for buyers within your industry or are there related / complementary industries you are willing to explore? Are you looking for buyers in a certain location? This will help you streamline your outreach campaigns (online and / or offline) and reach out to the maximum possible buyers in the shortest possible time.
Being Discoverable – Critical to Reaching Your Target Buyers
Sellers often spend time and money putting advertisements anywhere and everywhere. Focus on the being discoverable – identify options that give the maximum visibility for your sale proposition, but make sure your confidentiality is not compromised. Dedicated technology platforms like IndiaBizForSale are excellent for making your sale proposition searchable and discoverable by potential buyers. No matter where you advertise, make sure you create an attractive business brief to catch the buyers’ attention.
Handling Buyer Inquiries and Qualifying Prospective Buyers – Do’s and Don’ts
The real process of identifying a potential buyer for your business actually begins when you start receiving inquiries (interests) from buyers. Try to ascertain how serious the buyer is – Does he respond to your communication on a timely basis? Does he ask the relevant questions about you and your business? Is he ready to sign a Non-Disclosure Agreement (NDA) before you share any critical or sensitive information with him? Does he understand the deal-making process? Classify buyers by their genuineness and credibility and share detailed information only with the buyers who are qualified according to the assessment criteria set by you.
Handling Due Diligence and Getting Your Business Valuation Right
Once you and your buyer have established trust between yourselves, it is important to understand the process of Due Diligence. The buyer will usually have a team of professionals who will investigate your business extensively. It is important that you prepare for this stage right from the day when you decide to sell your business. Make sure your books of accounts, business incorporation documents, title and ownership documents, process documents and policy documents are all in place. Having said that, Due Diligence is so much more than just documents – a seasoned buyer is likely to analyse your business’s reputation, position in the market, customer satisfaction, and technology aspects, as applicable. For valuing your business, it is always advisable to take help from an experienced, expert valuer with credible track record. This will help in negotiating with the buyer and also give you a realistic expectation about the asking price of your business.
Negotiations and Deal Structuring – Get the Best from the Deal
At this stage, it is important to have a seasoned deal negotiator on board who can negotiate on aspects such as transaction modes (cash vs non-cash), payment timelines, title transfer timeline, distribution of part-payments (if any), and your post-sale involvement in the business. Apart from this, you will also need to discuss legal and compliance implications, such as tax liabilities, licenses, and so on.
Closing the Deal and Managing Transition
The final leg of the deal-making process is closing the deal – i.e. receive your due payment from the buyer and give the ownership of your business to the buyer through transfer of title. While it is usually a simple process, sometimes there are minor hiccups along the way to watch out for. For example, we have seen a few deals where last-minute conflicts have arisen due to the buyer / seller not fulfilling certain pre-defined terms and conditions. We usually mediate in such situations on request, and help the buyer and the seller reach a consensus through discussion.
Selling your business doesn’t necessarily need to be an overwhelming experience. With our wide network of thousands of buyers, experience, and expertise, you will be in a better position to pursue a deal successfully. To know more about what we do and how we can help you, visit IndiaBizforSale.com.