2. PROFITABILITY & RISK
What is Profitability and Risk?
Profitability – “the degree to which a business or activity yields profit or financial gain”
In most cases the only person that is in love with your business is you. A potential buyer is not in love with your business. They mostly want to know how little work and effort they have to put in to make a profit ongoing and what rate of return they will get on their investment. Purchasers are not buying your business, they are making an investment in an opportunity that hopefully will return a reasonable amount of income just like any other investment. For this reason I believe you have to see a potential purchaser as an astute investor if you want to sell your business. It is not about you and your business, it is about attracting a qualified buyer to actually purchase. Try and put yourself in the buyer’s position not in the seller’s position. The buyer’s position is about them and the seller’s position is about you. In the end it is them you have to satisfy.
Risk – “a situation involving exposure to danger, harm or loss”
In my experience not many, if any, sellers believe there is any risk in someone taking over and successfully operating their business. The reason for this is that the current owners started the business or have had it for a long time. They made it work, made it successful, and know all the absolute ins and outs of its structure, history, customers, suppliers, staff, etc and overall operation. Not much risk for them! This is certainly not the case for someone purchasing the business unless of course they have worked in the industry or are employees. Again I believe you must look at the sale from a buyer’s perspective as it is the buyer you must educate and prove to how little or how to overcome their fear of taking over your business. They do not know what you know about your business or how it operates so it is essential to explain and make clear the overall operation which reduces the risk of loss, failure and grief.