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The Silent Killers

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These are the ‘silent killers’ that can influence greatly the type of outcome when selling your business’

  1. Customer Diversity – Build a strong and diverse customer base so that no one customer makes up more than 15% of your revenue
  2. Declining Gross Margin – If your gross margin is dropping as you grow, this may indicate to a professional buyer that your competitive advantage is weakening and you’re having to compete on price to win customers.
  3. Bad lease – If your lease includes a change of ownership provision that requires you to seek the permission of the landlord before selling, this can scare off some buyers.
  4. Over-dependence on one supplier – Seek to have a variety of sources for your raw materials.  If you’re forced to buy from one supplier, their negotiating leverage over you can drag down your company’s value
  5. Bad Bookkeeping – Nothing scares off a buyer more than incomplete and shoddy bookkeeping – keep your books up to date and accurate.
  6. Regulated Markets – If you operate in a market where a change in government attitudes towards your industry can dramatically impact your business, expect buyers to get cold feet.
  7. Employee Retention – If you have employees crucial to the operation of your business, make sure they are provided with some sort of incentive to keep them beyond the sale of the business.
  8. Owner Dependence – Make sure that your company runs well without you when you are on a vacation .  A potential buyer needs assurances that the business can run without you when you are gone for good.
  9. Recurring Revenue – Try to create recurring revenue through Subscriptions or service contracts so a buyer can see the potential of solid sales into the future
  10. Goodwill – Cultivate a positive relationship with your customers to ensure that they are willing to recommend your business.  A potential buyer does not have to do a lot of research in the days of social media to find out what your customers are thinking.
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