What factors make your business attractive to buyers?

Are you thinking about selling your business? Then you want this process to be successful and to achieve the highest value for your business. But what aspects make your business attractive to a buyer? In this expert contribution, I elaborate on this using a checklist.

A buyer often looks "through your business" and basically focuses on cash flows and the risk profile. They want to know how quickly a business can pay for itself and whether additional financing will be needed. The risk profile indicates how certain future cash flows are.

Checklist

Anything that increases cash flows or increases their security is (in most cases) a plus for a buyer. This contributes to a higher value. Below is a comprehensive list of points you can use to assess what your business's strengths are:

1. Good past financial results that support projections.
2. Businesses with operating income greater than €1 million. For larger businesses, there are often more strategic buyers or investors available, who are also usually willing to pay more. Larger businesses are often associated with less risk.
3. A strong management team.
4. A business that is no longer dependent on the family. Family businesses often have higher returns than comparable businesses. But when sold, the question arises whether that higher return can be maintained or whether it is related to the family's efforts.
5. A business that is no longer dependent on its owners. When the entrepreneur still actively participates in the business, it is less attractive to buyers. The buyer has to replace the entrepreneur (additional costs) and there is uncertainty about whether the revenue model is not too dependent on the entrepreneur (e.g., customers who come specifically for the entrepreneur).
6. A scalable revenue model. This means that relatively low investment is required to significantly increase revenue.
7. Unique features that make competition difficult. Think great location, a patent or a high SEO score.
8. Recurring revenue. Businesses with a continuous stream of recurring revenue, such as subscriptions, are worth more than businesses that have to constantly generate customers and revenue.
9. A good spread of customers. Revenue should not be too dependent on a few customers, but nicely spread across multiple customers.
10. A diverse customer base. If revenue depends on different customer groups, risk is better spread out. This makes the business less dependent on a specific industry, which improves the risk profile.
11. Positive industry trends. Businesses that operate in an industry where trends provide growth or stability are easier to sell.
12. Solid, long-term contracts. Clear, long-term contracts with customers or suppliers provide more certainty about future revenue and costs.
13. Low debt. Low debt is often a sign of financial stability and can help buyers attract financing for the purchase.
14. Low absenteeism rates and loyal employees. This can indicate a good work culture within the organization.
15. Etc.

Indicative value

Want to know if your business is already attractive to buyers or what you can do to increase the value of your business? Have an (indicative) valuation made by a valuator. This way you not only know what your business is worth (within a certain range), but you can also quickly see where the opportunities lie to further increase that value.