Negotiating & Structuring The Deal

The thought of buying a business and investing what is for most people their life’s savings to do so can obviously be a very scary thought.

It is so important for a seller to keep this in mind when dealing with individual prospective buyers.

A major concern all buyers have is whether or not the business they are considering purchasing is right for them.

More specifically, they need to know if the business will continue to run well after they take over. The majority of businesses that are sold are to people who have no experience in that particular industry so not only do they have to be educated and well-trained post sale, there are countless unknowns they have to deal with BEFORE they make the decision to purchase it.

Since mostly everything a buyer will encounter when evaluating a business will be new to them, they can become overwhelmed quite easily.

As a seller, it is paramount that you simplify the business for them. If they believe it is too difficult for them to operate, there is no way they will close the deal.

One of the most effective tools a seller can develop is an “operations manual” for the business.

While it is something every business owner should have even if they are not selling, it can prove to be the difference between having deals fall apart or getting them closed.

This operations manual is not a business or marketing plan. Rather, it is a detailed document that lays out how everything in the business operates from turning the office alarm on to fulfilling orders and handling payroll.

It should include every single operational function of the business and pay special attention to what the owner does everyday and how they do it – after all, an individual buyer will be replacing the owner. There is no need to detail anything confidential.

The best way to do this is to break it down between the owner, the employees and the operations. For example, for the owner, list out all the tasks you do by day, week, month, quarter etc. Detail how each is done and why.

Then, compile the same exercise for every employee. List out their job title, responsibilities and the tasks they perform again by day, week, month, etc.

Finally, detail the operational side of the business for all functions and tasks such as how orders are received, processed, billed, goods shipped to clients, collected, etc. If there is any manufacturing involved detail how machines are maintained, or if in a distribution business for example how goods are ordered, when, how are orders determined, etc.. In pure service businesses outline how the company gets its clients and how each client is greeted, tracked, followed up with and all relevant functions pertaining to the client experience and marketing to get new ones.

Developing this operational manual that you can present to well-qualified buyers at the appropriate time will pay massive dividends in the business sale process and will prove to immediately eliminate every buyer’s concern about what they are supposed to do once they take over the business.


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