When getting ready to sell your business, it’s crucial to understand what buyers are really after: quality. But what exactly makes a business "quality"?

Buyers look for companies that not only are profitable but also show steady revenue and profit growth over time. Demonstrating three solid years of consistent profit increases signals that your business is in good shape and set for continued success. On the other hand, inconsistent or falling profits can raise concerns.

Margins are important too, but it's all about balance. While attractive margins catch the eye, margins that are too high compared to industry averages might indicate under-investment, meaning the business could require significant updates in infrastructure or operations post-sale. Instead, aim for robust, healthy margins that align with industry standards.

Good books are non-negotiable. Buyers expect financial reports to accurately reflect the company’s performance. When personal expenses mix too heavily with business expenses, it raises red flags. Clear books can reduce perceived risks and speed up the due diligence process.

Operational efficiency: Buyers favor businesses with documented processes and systems that run smoothly without constant owner involvement. A business that can operate independently is more attractive because it promises a smoother transition. Additionally, having a strong management team already in place adds significant value.

Diversified customer base. Relying heavily on one or two customers poses a major risk. Ideally, revenue should be spread across a broader range of clients to minimize disruptions if one customer departs.

Recurring revenue streams are highly prized as well. Companies that offer essential, recurring products or services generally command higher multiples. A loyal customer base provides predictable revenue, making future performance easier to forecast. In contrast, businesses in cyclical industries or with products that can be postponed tend to sell at lower multiples.

Intangible assets like brand equity, intellectual property, and proprietary systems create a competitive edge that’s hard for competitors to duplicate. These factors often allow for higher margins and can be a major selling point.

Finally, buyers are looking for growth potential. They want to see clear opportunities for expansion—whether that’s entering new markets, developing new products, or finding innovative ways to leverage existing assets. A well-defined growth strategy can significantly boost your business’s appeal and valuation.

You don’t have to meet every criterion to attract a serious buyer; it’s about reducing key risks and emphasizing your business’s strengths. By clearly showcasing what sets your business apart, you’ll stand out from the competition and achieve a higher valuation.