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Selling Your HNW Business? How to Tell Your Story to Buyers

How to Tell the Story of Your Business to Potential Buyers

The 5 Essential Components in an 8, 9, or 10-Figure Business Sale Package

Before you can sell your 8, 9, or 10-figure business, you need to be able to tell its story.

Your buyer will need more than just financials to understand what they’re getting and to properly appraise the value of their purchase. To prepare for negotiations with potential buyers in a merger or acquisition, you must first get your business house in order.

This article will walk you through all the artifacts you’ll need to help your buyers understand your business. You can think of these as the building blocks of the story of your business.

Two Other Critical Steps in Preparing to Sell Your Business

Before working through the tasks in this article, make sure and utilize these other two resources first. What you’re about to read is actually step 3 in the business exit process. Below you will find what you need to complete steps 1 and 2.

Step 1: Use this 17-point checklist to develop your business exit strategy

 

Step 2: The 5 critical members of your business sale team, and 8 tasks they will help you complete

 

With your exit strategy worked out and your team of experts in place, you’re now ready to start compiling what you’ll need to present your 8, 9, or 10-figure business to potential buyers.

Each of the items you’re about to see represents one component of essential information about your business. This information will enable you to conduct substantive and data-informed discussions during the merger and acquisition negotiation process.

5 Items Buyers of 8, 9, or 10-Figure Businesses Will Want to See

1. Your Business Profile

Any potential buyer needs to understand what makes your business special. They need to know how you built it up to this point, how you’ve organized it, and the goals you’ve been working toward achieving. The profile is where your business story begins.

At a minimum, your profile needs to touch on at least five areas:

  • Focus

What market sectors have you pursued, and why? Where are you devoting your resources? What new products or services are you working on, and why? What is your business about? What are your goals?

Communicate the mission of your business, and where the bulk of your efforts get invested.

  • Strategy

How are you working toward achieving the goals, products, and services you’re focusing on? What has worked well, and what hasn’t?

  • Differentiators

How is your business different from all the others? What needs are you meeting for customers that no other business is meeting? Or, how is the way you’re meeting those needs unique and better? Differentiation speaks directly to value.

  • History

Describe how your business began. How did you build it up to become an 8, 9, or 10 figure business? Walk through your growing pains, challenges, triumphs, and worries you’ve overcome. Show them your battle scars.

  • Org chart

Let them see the breakdown of personnel and responsibilities. This is what you’ve built, and it’s working. Show them how you’ve structured your team.

2. Your Customer Profile

Here, you want to assure your buyer of the health of your customer base. The more you know about your customers, the greater confidence your buyer will feel that they can come in and build on what you’ve started.

You want at least four elements to build your customer profile:

  • Demographics

This can go much further than age and ethnicity.

Depending on the size and nature of your business, the number of demographic categories you can amass can be immense. If you’ve been tracking things well, you may have categories as specific as ‘Hispanic homeowners in San Jose with college degrees and children,’ or ‘San Francisco Bay Area retirees who own pets, or ‘Fremont millionaires who vote Democrat.’

The more specific and the greater number of categories, the more potential your buyer will see for continued growth and marketing possibilities.

  • Buying Habits

Do you have mostly repeat customers and clients, or do you also attract a steady flow of new customers? Do they buy in bundles and in bulk, or mostly single purchases? Do they prefer specials and coupon deals? Do holidays play a role?

Do your customers come to you spontaneously because of brand reputation, or are they heavily responsive to your marketing? Do they shop mostly online, in store, over the phone, some other way?

Help your buyer understand how your customers have historically interacted with your 8, 9, or 10-figure business.

  • Target Audience

Your products and services are more than likely geared toward a specific audience. Describe that group for your buyer. What needs do they have? Why do these people or businesses have these needs? What problem are you solving for them?

This should correlate to your differentiators from your customer profile. The things that make your business different should be the very things your target audience needs or responds to the most.

  • List Size and Quality

List out how many people or businesses you have on your email list, your direct mail list, and as social media followers. Include a description of the quality of these lists.

For instance, if you have 10,000 mailing addresses but haven’t mailed them any direct mail in four years, you don’t really know how healthy or responsive that list will be. If you’ve been sending a steady stream of emails for several years, you should have strong data about open rates, clicks, and sales through email.

Your buyer will want to know the value of these critical marketing assets.

3. Your Business Processes and Assets

Specify the products and services your 8, 9, or 10-figure business has working for it. Again, you’re helping your buyer understand the number and value of assets they will be acquiring if they purchase your business.

Give figures for volume, revenue, and profits for your various products and services.

In addition, list out the personnel assets that will come with your business. You may be leaving, but you have key employees who will probably come as part of a merger or acquisition. These employees may be considered indispensable for the business to continue thriving, and the buyer should be made aware of who these valuable people are so they don’t just discard them.

The ‘people-transition’ process that must transpire during a merger and acquisition must be handled deftly and carefully to maintain the value and momentum of the business. In other words, you don’t want to alienate and anger all your key staff so they call it quits two weeks after the sale goes through. But you also don’t want the new owner to just fire them all.

Both sides need to recognize the potential value of what’s being given to them.

4. Your Marketing Data and Strategies

Here’s where you can give your buyer firm confidence that they can charge out of the gate right after taking the reins of your 8, 9, or 10-figure business.

When you can show them the marketing you’ve used that has worked, you will be able to seal the deal. Have data metrics showing how well your marketing has worked to do things like: Attract and retain new customers, raise your average transaction size, grow your revenue with regard to each product and service.

The more systematized your marketing, the more replicable. Your buyer won’t have to start from square one. This is one item your business sale team can help you with to better position your business with the highest possible value.

Some aspects of your marketing you’ll want to communicate about include:

  • How you acquire and attract customers

Show them your marketing funnels and the assets that comprise them. Show them conversion numbers at each step, if you have data at that level of detail.

Discuss your social media strategies, email, direct mail, TV, online, radio, print, and any other medium you’re using. Show them your best-performing ads and marketing campaigns in your various media.

What you don’t want is a buyer who realizes almost all your business comes from one source. If that source were to dry up for some reason, what would happen to your revenue? A healthy business – and one that will sell for maximum value – is one seen as low risk, high reward. That means customers coming in from a variety of sources.

  • How automated is your customer acquisition and retention?

Again, the more automated your marketing systems, the more your buyer will be able to visualize themselves continuing to earn the profits and revenues you’ll be showing them during negotiations.

In contrast, if your business is heavily dependent on referrals and personal relationships with you that are hard to quantify and replicate, it may appear that many of your revenue streams may dry up when you leave. If the business is more about you than systems of marketing, you may have a harder time selling.

In other words, an owner-centered business is worth less than a process-centered business. This is true whether it’s a mom-and-pop store or an 8, 9, or 10-figure business like yours.

  • Show your plan for retention of customers and staff

Marketing also depends on your staff not all jumping ship when you leave. Your employees know your business perhaps even better than you do. You need to have a plan for retaining your customer base and acquisition system, as well as your most valuable employees.

Discuss how you intend to communicate the ownership transition, when it gets to that point.

5. Your Business Finances

As the final component of the story of your business, show them the money.

Your financial picture should include income, costs, growth, and projections, and your data should go back at least five years. At a minimum, you’ll want to include:

  • Business growth for the last five years
  • Income (revenue and profit) for the last five years
  • Overhead expenses for the last five years
  • A responsible projection of future income

Don’t fudge anything. Don’t start the data at the place that makes your business look like it’s growing more than it really is. Just lay it out there and give an honest picture. If you have future expenses (such as business loans coming due) that you know will hit in the future, spell those out.

Be Ready for Questions

With a customer profile, a business profile, business processes and assets, marketing strategies, and finances, you will be presenting your potential buyer with all the major components of what they need to know to make an informed decision.

But they will no doubt have questions, and this is in part where your business sale team will shine. Your team should know the story of your business as well as you before any meetings take place with a buyer. They should be able to answer questions that touch on their area of expertise.

With you and your team prepared and ready with all this information, you will be well-positioned for a successful negotiation for the sale of your 8, 9, or 10-figure business.

 

 

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