When working with buyers, you are in sales mode all the time—from the initial contact to an on-site tour to meetings even after the deal is struck. Make each contact with the buyer positive. The initial tour should show the plant off in the best light. Let the buyer see clean work spaces, well organized inventory, efficient assembly areas, and offices that function and thrive, not shells of empty cubicles with desks piled high with storage boxes and discarded computers. The tour for a buyer is as critical as a sample product for a customer.
The second most popular question from buyers after “when can we meet the owners?” is “what is their web address?” A company’s website can say a lot about the company to a buyer, not all of it intentional.
Being a business owner can provide an owner the opportunity to meet interesting people, many owners of other businesses as well. Some of these owners may become customers. From time to time, the owner then becomes a customer of his customer, an arrangement good for both businesses. However, when this occurs there is the temptation to trade products rather than follow normal billing practices and exchange of payment. This practice is typically not in an owner’s best interest for several reasons.
Noise is defined as “sound that is loud, unpleasant, unexpected or undesired”. In a business context it means something or a series of things going on around the business that distracts everyone from accomplishing goals and objectives.
During a site visit to the business, the buyer says to the owner, “How much inventory is in this warehouse?”
Most business owners enjoy one or more aspects of running their business; product development, sales, financial management or operations. Rare is the business owner who enjoys the rules, regulations and paperwork required to maintain a business. Licenses and Permits are a “necessary evil” of running a business.
Trends tell a story, not necessarily the whole story, but they do convey a very strong message to buyers. Five-year trends in revenue and profits are especially important and should be carefully managed to the extent possible in the years leading up to a sale. All businesses go through cycles – sometimes these cycles are driven by forces of nature (a snowy winter / a warm winter), the national or regional economy (improving / in recession) or company specific events (gain or loss of a specific customer).
Business owners are constantly weighing the need to upgrade equipment and technology. On the one hand, they want to be as efficient and cutting edge as possible, on the other hand constant upgrades may have a negative effect on profitability and can be disruptive to bring online.
Remember that movie where a group of boys are walking along the train tracks on their way to an adventure? One of the boys stops and puts his ear to the tracks to listen for an oncoming train. But, in typical movie drama, the boys realize too late that not only is the train coming, it is just around the corner and bearing down hard, often while the boys are on a bridge or someplace difficult for them get to safety. In business, there is always a train coming, often taking the form of a younger, faster, smarter person with a new approach (e.g. Facebook) or an app that disrupts the status quo (e.g. Uber). The train may be a larger well-funded national company that chooses to enter a new market (e.g. XFINITY Home Security). If owners are not diligent, that train will overrun their business and industry before they can react.
Equipment leasing can be an attractive alternative to purchase, especially for office equipment and other items that lose value quickly. Managing equipment lease obligations in the years leading up to a sale can help facilitate a more efficient business sale.