Selling your business is a major milestone, and as someone who’s been through this process with countless clients, I can tell you this: understanding what buyers look for is the key to a smooth and successful sale. Buyers are not just purchasing your business; they’re buying into the confidence that your company will thrive under their ownership.
Here’s what buyers really want to see—and what you should focus on to meet their expectations.
1. Transparent Financials: Build Confidence
The first thing buyers will ask for is your financials, and they want them complete and easy to access. Can you generate your profit and loss statement or balance sheet in less than three minutes? If not, it’s time to tidy up your systems.
Buyers want transparency. They need to trust that your numbers are accurate and not manipulated. Delays, inconsistencies, or missing records immediately raise red flags. Clean, clear financials show you have nothing to hide, and they set the tone for trust in the entire transaction.
2. Clean and Organized Books: No Surprises
Once buyers have your financial statements, they’re going to dig deeper. Are your books clean and balanced, or are they filled with “plug entries” that mask sloppy bookkeeping? These quick fixes might seem harmless, but to a buyer, they’re like finding crumbs in the pantry—proof that bigger problems might be lurking.
Buyers want to feel confident that the numbers reflect reality. Clean books signal a well-run operation, while sloppy records invite skepticism and closer scrutiny.
3. A Story in the Numbers
Every business tells a story, and your financials are the chapters. Buyers will look beyond the top-line revenue to see what your profit margin says about your business’s health. A profit margin approaching 30% tells a story of efficiency and strong management.
They’ll also look at payroll—specifically, how much of your revenue is tied up in salaries, taxes, and benefits. Ideally, this number should be around one-third of revenue. It’s all about balance: enough investment in your team to drive growth, but not so much that it erodes profitability.
4. Smart Payroll Allocation: Know Where the Money Goes
As your business grows, payroll becomes more complex. For example, if you’ve transitioned from practitioner to CEO, your salary should be divided between attorney work and overhead. This kind of thoughtful allocation reassures buyers that you’ve structured your business strategically.
And when it comes to overhead, roles like office managers, IT, and bookkeepers should be accounted for separately from revenue-generating roles. Buyers want to see that you’ve accurately categorized these expenses—another signal of a well-run business.
5. Marketing ROI: A Tenfold Return
Finally, buyers will scrutinize your marketing expenses, which should sit at around 10% of revenue. Why? Because effective marketing should yield a tenfold return. For every dollar you spend on campaigns, salaries, or sales efforts, buyers want to see ten dollars of revenue generated.
Demonstrating a clear return on your marketing investment shows that your business not only knows how to attract clients but does so efficiently and sustainably.
Final Thoughts
Selling your business isn’t just about numbers; it’s about the confidence those numbers inspire. By keeping clean books, categorizing expenses properly, and demonstrating a healthy return on investment, you make your business more attractive to buyers—and more valuable.
At Cathcap, we specialize in preparing businesses for sale by focusing on exactly these areas. If you’re thinking about exiting your business, let’s talk about how we can position you to maximize your value and sell on your terms.
Remember, a little preparation today can make all the difference tomorrow.
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