Salability of Your Business

The post-economic downturn period has turned out to be mayhem for business owners who are hoping to sell their business. With closed deals at a record low, it’s true to say that most business owners looking to sell now are finding it difficult to stay positive. Having such a gloomy outlook, it is advisable for any business owner with a company on the market or who is planning to do so should be aware of the following four considerations.

Profitability potential

Anyone looking to purchase a business wants to feel confident about the ability of that business to make money in the future. If business sellers don’t make their companies’ potential for profitability crystal clear, they’ll have a hard time keeping potential buyers interested long enough to get a deal off the ground. Any seller with evidence of steady, reliable cash flow and revenues automatically has a leg up, which could mean the difference between selling and not selling in today’s formidable market. Mr Rahul Jain, CEO at Business Coaching India says, “If buyers can see a business has managed to maintain its profitability during these tough times, they’ll know there’s stronger potential for when the market improves and there’s less risk in moving forward with a transaction.”

Strategic value

Not only is it important for business sellers to show potential buyers they’ve maintained profitability during these difficult economic times, but also to provide evidence that the business has the potential to grow and thrive to a greater extent down the line. Sellers who can offer buyers a focused plan for growth, which include strategies such as acquiring competitors or expanding to a complementary product or service are having an easier time closing deals.

Seller financing

There’s been a lot of emphasis placed on a seller’s willingness to finance at least part of any business-for-sale deal in recent months, and for good reason. Transactions that require buyers to come up with the entire purchase price of a business simply aren’t able to close in most cases. Buyers are faced with major drops in savings and as a result of the downturn they’ve been hit with increasingly limited access to viable commercial loans. According to Mr. T R Bajalia, Executive Director, IDBI, “ Nowadays sellers are willing to finance part of the sale price and allow buyers to pay them back with interest later are having the greatest level of success.”

Loan against assets

It’s no secret that banks are more cautious about lending now than during any time in recent memory. As a result, businesses with greater amounts of tangible assets such as capital equipment or owned real estate are having much more success securing purchase loans. “Post-recession we have become extra cautious when giving loans, be it personal or business. It is better if loan seekers have valuable assets against which loans can be granted”, says Mr Bajalia.