In previous posts, we talked about the importance of making deals with buyers you can trust. But it’s equally important that potential buyers know they can trust you. So if you’re thinking about selling your business, it’s never too soon to start building credibility with potential buyers.
It’s easy for your marketing staff to paint a glowing picture of a well-run business. But when your company makes claims about high quality products, great service, and well-equipped facilities, you will need solid evidence to substantiate those claims when courting potential buyers.
Here are our five tips for building credibility with outsiders.
1. Keep immaculate facilities.
A clean, well-organized facility makes a strong visual statement that your company pays attention to details. It shows that you and your staff understand how hard it can be to maximize productivity and efficiency in a work environment that’s in disarray.
2. Keep meticulous financial reporting.
If your company is in the habit of keeping good records and metrics, you will be able to quickly respond to requests during the buyer’s due diligence process. Experienced buyers expect quick, to-the-point responses to their questions.
3. Show visibility in the community.
If your company typically keeps a relatively low profile in the community, now is time to increase awareness. Encourage employees to volunteer at local nonprofits. Sponsor or host local fundraisers. Donate to respected community charities. Mentor students from local high schools or community colleges. Raising your visibility within your community can help you build relationships with community influencers and attract more enthusiastic employees.
4. Maintain a sterling reputation.
Do you pay attention to how your company is perceived online? If you get positive reviews and compliments from employees, try to turn them into testimonials. When you get complaints from customers or previous employees, be proactive in mitigating the damage in a meaningful way. If a potential buyer happened to ask one of your customers (or past customers) for a candid opinion of your company, would they mostly hear good things?
5. Practice transparency.
In everyday business operations, transparency means your enterprise is free from pretense or deceit. During the selling process, transparency refers to the accessibility of information about your business practices.
Of course your gut instinct is to highlight all of your company’s operations in the most favorable light. But buyers understand that no company is totally free of problems. When you are honest about shortcomings and explain how you plan to address them, you will build credibility in the eyes of the buyer.
Credibility is defined as the quality of being believable or worthy of trust. There is no magic formula for achieving it or measuring it. Credibility is earned through consistent, forthright actions over time.
If your credibility is damaged when a buyer discovers undisclosed issues during due diligence, you may not get a second chance to regain the buyer’s trust.
In the process of buying, selling, and growing companies, I have observed dozens of instances in which a seller’s credibility affected the outcome of a deal. It’s one of those intangible assets that not only attract potential buyers, but also creates the conditions for a quick, successful close and smooth post-sale integration.
When a buyer perceives you as credible, they may have more confidence in your financial projections or give you the benefit of the doubt on line items they might have questioned. If a buyer is aware of the weaknesses in your operation before buying your company, their transition team can be prepared to address those areas during the due diligence process and post-sale integration period. Sometimes your weaknesses might be one of the buyer’s strengths.
Call me at 561-543-2323 and I can tell you more about entrepreneurs who raised the value of the companies with their integrity, credibility, and transparency. If you’re thinking about selling your business in the near future, the LaManna Consulting Group can help you feel fully prepared for the process.