The concept we want to cover in this tip is the idea that Business Buyers Hate Risk. All buyers, by their nature, are always on the lookout for the worst case scenario. It’s not overstating things to say that buyers are paranoid to a certain degree. So, the more you can do to lower the level of risk they perceive within your business, the easier it will be for you to sell the business.
The less risk the buyer perceives, the higher a selling price you will get, and the more risk the buyer perceives the lower a selling price you will be able to get.
The biggest red flag in the buyer’s mind when it comes to their assessment of how risky your business would be to own is any legal issues or contingent liabilities that you are facing. “Contingent Liabilities” simply means any expenses or obligations that may come due in the future. Not just pending lawsuits but any issues you have with a government agency. Also, any warranty obligations you’ve made to customers, pension fund claims, insurance claims or unresolved disputes with customers.
Whatever time and expense is needed to settle or correct these things will be much less than the “worst case scenarios” dreamed up by the buyer.
Also, remember, you are competing with other businesses that are for sale for this buyer’s commitment and money. Buyers will always be comparing your business to the others that are for sale and outstanding legal issues and contingent liabilities will always make your business look less attractive and harder to sell. So again, if you have any of these types of issues hanging over your head, invest the time and money needed to resolve them now – it will make it much easier for you to sell your business.
Or to put it another way: it will make it much easier for a buyer to choose your business over some other business that is also for sale.