Generally, buyer activity for an existing business is typically observed in two price ranges, given the current market structure of ready-made business sales. The first range lies between 300 and 900 thousand dollars. This is the field of active private investors, for most of whom the coveted sum of $1 million is a kind of insurmountable psychological threshold. Over $10 million is the territory of large financial-industrial holdings, which are simply not interested in objects with lower value.
But, despite all the above, there are investors in Ukraine who are interested in investing in medium-sized businesses. And the seller of a ready-made business, when developing a sales strategy, should focus on companies operating in your or a related market segment, but on a much larger scale. Such companies, when buying a business, are guided by considerations of expanding the sales market and product range.
Fair price – truth or fiction?
Any potential buyer considers buying a new business as a transaction involving increased risk. And it is quite understandable that he will take this step only if he has a sufficiently compelling reason. It goes without saying that there can be no talk of any fair price in the market for the sale of an existing business. Even a simple site valuation causes disagreements between the parties, let alone larger investments.
Often, the buyer has his own idea of the so-called 'investment value', which is based only on plans known only to him regarding the business being acquired. If the asking price meets the buyer's expectations, a deal is made. If the opposite is true, the investor continues to search for objects of interest. It is possible that ordinary bargaining can bring the parties to a compromise.
Below we will give a few points that will help to more specifically consider the issue of determining a price attractive to an investor.
There must be a clear understanding that it is primarily the income that this business can generate that is being sold. Accordingly, the higher the income and the more stable the business, the higher its value. As a rule, it is no more than four times the company's annual income. Also, the presence of valuable assets in the enterprise, on the one hand, significantly reduces the buyer's risks, and on the other hand, increases the company's value.
Possibility of quick exit
As practice shows, most buyers feel more comfortable if the transfer of the business to the new owner and payment occurs in stages. The process can last from several months to six months (sometimes longer), depending on the specifics of the business. This transaction scheme significantly reduces the buyer's risks and allows them to know the real state of affairs at the enterprise. That is, the owner must count on a rather long process of transferring ownership and receiving the entire agreed amount. It is worth noting that without trust between the seller and the buyer, a successful sale of a ready-made business is very difficult.
How to sell a medium-sized business
In order for the sale of a medium-sized business enterprise to be successful, it is necessary to follow some rules.
First, make sure that the industry in which the company operates is promising and has positive growth dynamics.
Second, analyze the market and make sure that the price asked for the enterprise is reasonable and adequate. Plus for the seller who is open to reasonable bargaining and has created a convenient for transfer but at the same time simple legal structure of the business.
Third, it removes unnecessary suspicion when the owner does not show excessive haste in such a serious matter and is not opposed to the deal being stretched out over time. After all, if one party sets the price of the deal, the other may well afford to determine its structure.
For a successful sale of the enterprise, it is necessary to determine in advance the circle of companies – potential buyers. At the initial stage of negotiations, it is best to try to establish personal contact with their owners.
But do not rush headlong into the search for potential buyers. First of all, analyze your business and develop an attractive offer for sale, guided by the criteria 'price – business composition – perspective'. It is very important that the seller is guided not by emotions but by common sense when making an offer. Therefore, put yourself in the buyer's shoes and answer a simple question: would you agree to participate in this deal on these terms.
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