By Gregg Kunz
The number and variety of attractive businesses for sale in Colorado makes the Denver market a vibrant one. When considering selling your business, it is important to have a clear understanding of what makes your company attractive to prospective buyers. A professional business broker, especially one with industry certifications can guide you through the sales process and advise you on what buyers look for when evaluating a business to purchase. The right business broker can substantially increase the likelihood of the sale of your business and shorten the business sales cycle.
Far too many brokers prejudge a businesses’ viability for sale based solely on company financials and after an all too often brief conversation with the business owner. If the broker you are speaking with is not willing to dig into the details of what makes your business unique then you ought not waste your time with them. While the numbers are an important consideration, we’ve learned over the years that the true value of a business is many times hard to quantify without a series of conversations to understand multiple aspects of your business. Conversely, when selling a business, discovering a single weak area of the business can severely diminish the value of your company. Let me explain.
When considering who will partner with you in the sale of your business, consider which broker will look beyond just the numbers. Our ideal clients don’t fall within a certain industry. Rather, our team of business brokers considers ourselves industry agnostic, focusing more on the attributes of a successful business rather than targeting specific industries or markets. If there is a commonality in the sellers with whom we work, it is that they have a set of attributes which salable businesses tend to share: a track record of predictable revenues and profits, consistent and predictable growth, clean financials, a management team in place, and a business owner who has a sense of urgency and willingness to follow the broker’s direction in the sales process. Afterall, in most cases the business owner has never sold a business before, so trusting the broker’s guidance normally will yield the most positive outcome.
Another extremely important quality the RMBA team looks for when considering a relationship with a seller is that their business is not entirely – or even mostly – dependent upon that owner’s unique relationships, expertise or personal knowledge. Attributes and connections that are exclusive to one person simply aren’t transferable to a buyer and can vastly affect the salability of a business and its future profitability under new ownership.
Similarly, businesses with low customer concentration, meaning that no single customer comprises more than 15% of annual revenue is much easier to sell than those where one customer makes up 20% or more of annual revenue. One customer who comprises a lion’s share of revenues scares off buyers and banks – and for good reason. If that one client’s business goes south, or even if their purchasing cycle stalls, it dramatically affects overall profits and the ability for the buyer to meet the debt obligations which allowed them to purchase the business. It means increased risk for the business and even more so for the lender – the most risk-adverse party involved in the sales transaction.
Also, extremely attractive to a buyer is having a capable management team in place that will transition with new ownership. A general manager who is going to stay with the business post-sale can substantially widen the potential buyer pool because the buyer may not need extensive industry expertise. The general manager can ensure that the business’s day-to-day operations continue to operate smoothly while the new owner provides strategic direction and oversight while learning the business. This means that a buyer with strong general management experience can bring that to bear in an industry which they may have little direct knowledge.
For the majority of business owners selling their business is a once in a lifetime event in which they have zero prior experience. Consulting with an experienced business broker and following their lead in the sales process usually results in the highest selling price in the shortest period of time.
If you are considering selling your business now or sometime in the future, we’d be happy to connect with you and discuss ways to correctly prepare and position your company for the best possible outcome. We love speaking with business owners because we speak the same language. After all, prior to becoming a business broker many of us were business owners ourselves and knowing how to sell a business was a mystery. Give us a call today and let’s start the conversation.
Gregg Kunz is a Colorado Business Broker and Certified Business Intermediary (CBI) with more than 20 years in senior executive management, a three-time business owner and a master in negotiations. He is the principal broker at Rocky Mountain Business Advisors and is considered an expert in Mergers & Acquisitions.
Please note: Our office is in Denver, and our business brokers cover all of Colorado, the Front Range, and the Denver metro area, including: Centennial, Lone Tree, Highlands Ranch, Englewood, Littleton, Denver Tech Center, Golden, Lakewood, Arvada, Wheat Ridge, Thornton, Northglenn, Westminster, Broomfield, Brighton, and Commerce City. We also help business owners in Boulder, Lafayette, Louisville, Fort Collins, Greeley, Wyoming, and New Mexico sell their businesses.