If you’re someone who is looking forward to selling your existing business, it’s highly unlikely that you will not have come across any potential industry buyers. Sometimes, these buyers might even come up with offers that are too good to be refused. However, the fact is that most of these deals are not done in a satisfactory manner due to a lack of knowledge on the seller’s part. Industry buyers are always looking for businesses that can be bought without having to spend tons of money. You might not even be aware that their strategic planning involves the merging of your business to their existing one in order to skyrocket their sales.
This article will let you know some of the useful tips that will come handy if you’re planning to find an industry buyer or have already been approached by one.
- Any industry buyer should not be your advisor
First things first, you need to make it clear that any industry buyer is not going to look out for any interests except for his own. This is exactly why you shouldn’t be relying on him for business advice while selling your business. Sellers can get tricked into selling their business at a lower price if the industry buyers manage to manipulate them.
Industry buyers often include hidden terms and conditions that might end up costing you if you’re going to put all your trust in them. While you shouldn’t treat any industry buyer that approaches with outright skepticism, you but you should be able to look through the offers he makes.
- Do not proceed without proper business valuation
Not having a proper business valuation can also make you fall prey to industry buyers looking for opportunities to grab your business with the least amount of money possible. How are you going to understand the fairness of a deal if your business valuation hasn’t been done extensively?
Thus, it becomes clear that you should get a proper idea of the value of your business. This value should be the standard you use when you compare offers you receive from an industry buyer.
Avoid compromising with the selling price just because you can finalize the deal relatively quickly. It is always better to have patience until you’re likely to get the appropriate price for your business.
- Be careful with an earn-out based purchase offer
Another thing that you need to keep in mind is that earn-out shouldn’t be made a standard while selling your existing business. In the case of earn-out, the selling price of the business is affected by its future performance when it’s in the hands of the new buyers. While selling your business to an industry buyer, you shouldn’t keep the earn-out longer than a year if you agree to it at all.
- Get a team of professional advisors that could help you target multiple buyers
Now, this is the most important part and has a crucial role in determining the success of your business deal. Having a team of professional advisors lets you avoid any mistakes that you might end up making because of your lack of knowledge. Everything from the business valuation to the process of reaching out to the potential buyers needs to be done with the proper consultancy of this advisory team. This way you can ensure that every aspect of the sale is carried out precisely how it should be.
If you do not have a team of professional advisors while you are looking to sell your business, some extra money can be paid to a team which should comprise of an accountant, attorney, and a financial planner. This investment is certainly a wise decision because you will be paying these people in order to ensure that they keep your interests their topmost priority. You also want to make sure that these professionals are located in you area. If, for example, you have a business for sale in Houston, make sure these professionals are based in the Houston area, as you are going to want to meet them in person.
- Checking the credits of buyer along with confidentiality agreement is of utmost importance
Being approached by industry buyers does not mean that they will certainly buy your business. On top of it, you can’t know if they even have the money they are offering you for the deal. This is why it becomes very important to check their credit and be sure that you’re not wasting your time.
Apart from this, confidentiality plays a major role in any business deal with an industry buyer. Thus, you must not ignore crucial documents like confidentiality agreement before you enter into any agreement.
You should now have a clear idea of the things that need to be kept in mind when dealing with an industry buyer. These tips will let you avoid getting tricked into an unfair deal. However, you must do an extensive amount of research before you actually sell your business to anyone, be it an industry buyer or not.