BizSale Small Business Blog. Small businesses for sale.

Before selling a business you may have plans to expand it, here are some tips for getting support from business investors.

1. Your presentation doesn’t have to be perfect, just make sure it is captivating enough to keep the investors attention. Be clear on what you want to say, it will be a stronger story.

2. Once you have finished explaining your business and have answered any questions, remain alert until you have said your goodbyes. Try not to ease into relaxed talk, they may ask a question when you have let your guard down to which you could easily regret giving the answer afterwards.

3. Remember that the investors will most likely be seeing other business owners who are looking to attract investors as well. Just focus on giving a strong presentation, and you will provide good competition yourself.

4. It doesn’t matter to the investors how many times you have answered the same questions about your business, to them it is the first. Remember to be consistently enthusiastic in your presentation.

5. You may be asked difficult, even personal questions, do not be tempted to skim over the truth, the investor most likely has invested in other businesses before and are well aware of the likely pitfalls. Be honest.

6. The investor sitting before you has listened to many pitches about wonderful businesses that will guarantee they strike it rich! Make yours stand out with its individuality and with your own enthusiasm. Be sincere and this is what the investor will recall from your meeting when they come to decide which business to commit to investing in.

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

I had some correspondence this week from a chap who owns a debt collection agency and is looking to buy small businesses in order to expand.

Having found something he liked up in Scotland, he asked for advice in valuing the business as he had no idea whether the price being asked was too much, or a good deal.

The information he provided on the business is as follows:

Turnover is: £70000
Outgoings from this: £40000
Net Profit: £30000

He understood the business and he said that it had a good client list and sales are “mostly repeat business”.

The point I made to this man is that most people think that valuing a business is a simple task and that a value can be arrived at simply by adding a couple of numbers together.

Unfortunately it is not that simple.

In this case, the most important point to explore was defining what the ‘outgoings’ are. Here, the prospective buyer got it completely wrong in his assumptions. On further inspection it transpired that outgoings did not include the cost of the owner’s time.

So, let’s assume this was a full-time job for the owner and he drew a salary of £30k. Seems reasonable. What happens to the figures now? Suddenly, the equation becomes:

Turnover is: £70000
Outgoings from this: £70000
Net Profit: £0

Does not seem such a good deal after all, does it? The question must be asked why the prospective buyer would want to risk £40K (that was what the vendor wanted) in order to land a job paying an average salary. Let’s say that the buyer puts his own manager in at 30K. How is he to make this acquisition pay? How long before it provides a return on his investment?

Our advice in this case was to offer the vendor a much-reduced amount up-front, followed by a number of deferred payments over time depending on revenues achieved.

We will talk more about the very useful tactic of deferring payments later.

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!