Selling a Business: Getting a Buyer’s Attention
13 January 2025: Selling a Business: Getting a Buyer’s Attention
Finding buyers for a business these days can, for certain businesses, be challenging.
“What?!?”, you say??? “I thought this is a great time to sell℠!”
Well, yes, as our tagline states, “Every business that doesn’t fail will be sold… EVERY ONE!” But, hopefully, it won’t surprise you to learn that not all businesses are equal – as in “equally desirable”.
On this blog and in our weekly Office Hours and Pro Sessions in The Brokers Roundtable℠, we’ve often discussed one of the main seller challenges, specifically, the Silver Tsunami; the number of businesses coming to market since Baby Boomers started heading for the exits.
Competition
Why is this a challenge? Well, from a simple “supply and demand” standpoint, if the availability of something increases without a corresponding increase in demand, buyers can be more picky.
For example, if there were two similar businesses for sale in Kansas City in 2019 and now there are eight, qualified buyers will gravitate toward the best of those eight. As a result, the best ones will likely sell sooner and at higher multiples. The less desirable may languish on the market until they become “more desirable” – a euphemism that generally means “more attractively (or realistically) priced”.
It’s important to keep in mind that, regardless of how meaningful a business is to its owner, buyers have many options. We have to consistently advise clients that their business is generally one of dozens in the same geographic market or industry segment that can be acquired and that we – our client and our team – must do whatever possible to get the one we’re selling to compare favorably with that competition.
__________________________________________________________________________________
We offer a comprehensive coaching program – both group coaching in our Brokers’ Roundtable℠ community as well as one-on-one coaching – tailored to Realtors, business owners , buyers and anyone interested in valuing, buying or selling a business.
To learn more, check out Resources in The Brokers Roundtable℠
___________________________________________________________________________________
We’ve posted often about the myriad issues sellers must consider if the selling effort has a reasonable chance of success: knowing what the business is worth; price expectation in relation to value; preparation; quality of financial records and other information; proper representation; committed employees; a post-closing life plan; a general understanding of the process; etc.
All that, though certainly critical, is not necessarily enough. Understanding how the business you want to sell stacks up against the competition involves also understanding how brokers look at it. Professional business brokers, after all, generally have a stable-full of buyers. (Just look at the Businesses We’re Looking For… section of The Brokers Roundtable℠!)
The Business Broker
Like most people who value their time and discriminate in favor of tasks that are more likely to be remunerative (financially or emotionally), business brokers tend to place most of their focus on businesses they feel have a high probability of selling. And while all of the characteristics mentioned above are important in a broker’s “probability of selling” calculation, many employ a unique, albeit somewhat subjective approach to classifying businesses and placing them in some order relative to where they should be spending their time.
A couple of years ago, I was in Denver attending that year’s annual International Business Brokers Association (IBBA) conference. these conferences are not only opportunities to network with others in the industry but also replete with courses and workshops that provide a wealth of knowledge about all aspects of brokering small and mid-market businesses. They also provide an intense opportunity to complete most of the necessary continuing education requirements for Certified Business Intermediaries to maintain that coveted and fairly rare CBI designation.
_____________________________________________________________________________________
REALTORS! Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to accurately value and successfully sell businesses.
Don’t Miss Out on the “Silver Tsunami”!
It was at that annual conference that I attended a workshop authored by Aaron Thom, a colleague with California Business Advisors. This workshop would give me four credit hours toward the continuing education requirements to assure that my CBI designation continued in good standing. Aaron’s topic? Focusing on the “A”s.
Aaron’s advice to beginning business brokers was to classify their listings into three categories – A, B and C, based on the probability of each business selling – and to focus on the “A”s, the ones that would be most likely to provide an early success.
The theory here was that certain businesses were more sell-able than others and that if a broker was scheduling an eight-hour day, that broker would be wise to focus on the “A”s before any of the other businesses in the listing pool.
Aaron’s workshop included a slide deck that contained not only data to support his contention that brokers should focus on the “A”s but also a simple description that he developed to help brokers classify their listings – and hone their focus. From bottom to top, here’s how he laid it out.
C. Low or questionable discretionary earnings; problematic or vague financials; a history of less than five years; declining revenue; no plan for life after selling; an unpopular industry, i.e., retail, restaurant, small franchise, etc.
B. Discretionary earnings of at least $100,00o; ready to sell now or within two years; has at least two employees; located within an hour of a major metro area; has a 5-year history; growing or flat revenue; a reasonably popular industry, i.e., service, B2B.
A. Discretionary earnings of $200,000 or more; at least five employees; in business of rat least 10 years; growing revenue; selling for personal/health/economic reasons; a plan is in place for life after the sale; an in-demand industry, i.e.,manufacturing, wholesale/distribution, healthcare, the trades, etc.
The Bottom Line
Business – and life itself – has changed some over the past few years and some modifications to Aaron’s business characteristics might be in order. For example, for a business to be classified “A”, I might look for $350,000 in DE. And we see significant demand of B2B and certain service industries.
But the point here is to look at the business you want to sell with a critical eye; consider the competition and how a professional business broker will look at it, classify it and where it might fall on the sell-ability scale.
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
Searching For…
A NOTE TO READERS: Our “Searching For…” feature has been moved to our online support platform, The Brokers Roundtable℠. It will appear there exclusively.
#business #businessacquisition #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation #MergersandAcquisitions #buyabusiness #sellabusiness #realtor #realestateagents
The author is the founder, in 2001, of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at
jo*@Wo*******************.com