How to make your business attractive to potential buyers – 4 Tips and Tricks

1. Profits – Small business buyers are looking for a specific level of profits. 100k is the minimum amount, and the more the merrier. Businesses that make under 100k in profits are still potentially salable, but the market is small, and deep concessions are typical.

2. Books and Records – Accurate and up to date. This is non-negotiable and is the cause of most business sale headaches. Sellers need to produce at least three years of Profit and Loss Statements, a current balance sheet and the prior 3 years of tax returns. Profit and Loss and Tax return figures need to match. Buyers do not feel warm and fuzzy if you are cheating on your taxes. Avoid unnecessary tax filing extensions if you are in the market to sell as tax returns will need to be up to date (remember filing a tax extension is not an extension to pay, so extensions are typically unnecessary and costly).

3. Employees – Consider two businesses; Business #1 is a one-man shop, the owner is sole employee who acts as the Salesman, Manager, Secretary, Installer, Accountant and Janitor. Business #2 – has several employees and the owner is left in charge of oversight and planning. Obviously, business number 2 is more attractive. But hey there is nothing more exciting than running into the one-man business owner at a cocktail party so you can listen to how many hours he works in a week!

4. Bankable – Being eligible for a bank loan opens the flood gates of potential buyers. Typical SBA loans require 10% down and sellers receive the bulk of the sales proceeds up front. The loan process is often misunderstood in relation to smaller business transactions. Lenders will order tax returns and then an appraisal – that is the bulk of the process for the seller. The lender will not put your books together or perform a detailed audit, they are only concerned with the numbers on your tax returns (hence the importance of accurate tax returns).