Preparing to Sell Your Business? Here’s What Buyers Are Looking for

Let me start with something that you might not want to hear: 

Just because your business is profitable doesn’t mean it’s ready to sell.

As a small business coach, I’ve seen far too many business owners make the mistake of thinking that a healthy bottom line is all it takes to attract a buyer, but it’s most definitely not.

A lot goes into selling a business, and in the same way, many things go into buying it. 

Just as purchasing a house requires more than liking the exterior, you must understand that buyers are trying to determine whether your business is built for continued success.

To get you started, here are the three main things that buyers look for:

Financial Performance

I said profitability isn’t everything, but I would argue stable revenue that it is the most crucial matter. 

You might have seen that coming and probably think buyers are only focused on numbers to determine whether your business is worth the investment.

You are correct on some level, but numbers and revenue streams also help us see the full picture of a business’s room for growth.

The three things that you need to get in place: 

• Consistent revenue
• Strong profit margins
• Clean financial records

I always ask where the revenue comes from and how big the profit margins are. If you can create revenue stability, your business will always be worth more.

It’s ideal to have at least three years of financial records that show growth and profitability. If your finances tell a positive story, you’re already ahead of the game.

Pro tip: Start preparing your financial records early. 

If you can also track your expenses and revenue in real-time, that would change everything. 

You wouldn’t want to scramble through your journal entries, finding that one Excel file with your numbers from July three years ago. 

Many owners are already doing this, but you may need a reminder: Be diligent with your books!

If you don’t have your finances in order, you might as well forget about selling your business.

Ensure everything is accounted for and you’re showing consistent revenue; then you’re golden! 

Labor Force Stability

Repeat after me, “The business is only as good as the people who run it.”

If your teams are skilled, reliable, and motivated, they become one of your most valuable assets—they might even be a selling point!

I like to ask a question: where does the labor force come from to run this business?

Your region’s availability of skilled labor can make or break a deal. If your business relies on specialized skills, buyers will want to know whether they can easily find and hire new people.

Other things that are worth asking:

• Is there enough labor force in the area?
• Will it be hard to hire new people?
• Are there paths for your team to grow?

Buyers also pay attention to your leadership style, as it directly impacts the stability and motivation of your workforce. A robust and positive leadership style can be a selling point, demonstrating that your business has a solid foundation and is poised for continued success.

I remember when I pitched to this one local business owner. They had really good numbers, products, and prices, but the deal didn’t go through.

Why?

Their team was weak, for lack of a better term. And no, not physically, but structurally. 

They had high turnover rates, which led to labor shortages for a certain period, and their processes were in constant flux due to inexperienced staff.

Buyers look for opportunities for development because it ensures continuity and demonstrates a strong foundation for your team to work on. 

Pro tip: Evaluate, equip, and evolve. 

To maintain stability, invest in your workforce with training programs, coaching, and competitive wages. These investments will eventually pay for themselves. 

Competitiveness of the Product Prices

We talked about the numbers and the people. 

Now, we’ll talk about the product, specifically your pricing. 

Buyers often focus on how their pricing strategy compares to the competition because this directly affects their market position.

If your prices are too high, you risk losing your customers and market share. Too low, and you might be eroding your profit margins.

Pro tip: Review and adjust your pricing strategy regularly.

This is the one thing a business owner I recently talked to prioritized. They found that sweet spot where they offered value while maintaining healthy margins and were proud of it (as they should be!). 

Many business owners are hesitant about this because they’re scared of the consequences of adjusting prices. But there’s nothing wrong with it, especially if it’s for sustainability. 

When the cost of raw materials, labor, and overhead changes, your prices most likely have to move, too. 

Remember, a well-thought-out pricing strategy lets your buyers know your business is poised to thrive in a competitive market. 

Bonus tip from me

I discussed labor force stability earlier, but I also wanted to talk about the other layer that goes into building a solid team:

Loyalty.

I gravitate towards businesses whose staff are loyal to the business and its growth.

While we don’t always change entire processes, I think it’s really important for your workers to be open to growing, adapting, and learning better business practices. A little is appreciated, but a lot is great.

This paints a picture of who to retain and train (wow, that rhymed).

I’ve also seen this translate to operational efficiency, which is a ton of help in the long run. So, I guess this is also a reminder to create an environment for your staff to want to grow and not just coast along.

Conclusion

Selling a business isn’t just about passing the baton to the next owner.

In addition to these three things (well, four if you count the bonus tip), you can also focus on your market position, operational efficiency, and customer retention rates.

It’s about convincing the buyer that your business is successful now and poised for future growth and stability.