Business owners often concentrate on their potential profit when getting ready to sell but finding the right buyer should be about more than just money. If you’re like most business owners, your business is the result of the time, energy and hard work you invested. Even if you’re ready to retire, you still want an owner who will respect what you’ve built. On a more practical note, certain types of financing options mean that, if the new owner fails, you never receive the full sale price for the business. Finding the right buyer means that your business goes into safe hands.
Determine Your Goals
The first step to finding the right buyer is determining what that means for you. Ask yourself what you want from a buyer. A good return on your investment is a start, do you want a buyer who shares your values? What is your ideal outcome? How is the sale likely to impact your employees?
Take the time to think about your personal goals as well. Some business owners are ready to walk away and retire to Miami. If this is you, you’re looking for a different buyer than the person who wants to continue working at a company owned by someone new.
Understand the Types of Buyers
Buyers of businesses come in three main types: strategic, financial and operator. One of these types should stand out based on what you want from your buyer.
Strategic buyers are looking for a business to meet an identified need and, because of this, may have a higher budget. Needs can include expanding into new locations, expanding the type of services they offer or acquiring their competition. Finally, strategic buyers may be looking at a synergistic acquisition, where they buy a business that excels where they’re weak. Combining the two eliminates their weaknesses.
Financial buyers are professional investors, such as hedge funds, private equity firms and investment partnerships. They tend to put profitability first. Some intend to ask owners to continue running profitable businesses. Others look for mismanaged businesses and plan to turn them around before selling again for a profit. These types of buyers tend to negotiate aggressively on price.
Operator buyers are people who want to run a successful business. They are often looking for a life or career change or may have been laid off, and buying an existing business has fewer risks for them than starting from scratch. They are generally the least experienced potential buyers and may also have difficulty securing financing.
Assess Your Options
When offers start coming in, take the time to assess your options rather than just choosing the first or highest offer. It’s important to pre-qualify buyers. This means more than making sure they can afford to purchase the business. It’s also important to look at their experience and whether they have the skills to continue your business’s success. If you plan to stay on, either for a transition period or to continue running the business, consider if you can work easily with them to get the most out your business relationship.
Work with a Broker
Having an intermediary can help make this process run smoothly. A broker understands the types of buyers out there and can advise you on which type of buyer would be interested in your business. They can also do the leg work of advertising for the person you want and pre-qualifying prospective buyers. In negotiations, an experienced broker understands the motivations of different types of buyers and can help you get the best deal.
Finding the right type of buyer for your business often means more than just a large sum of money. It’s also about finding a buyer with similar values who will continue to look after your employees, clients and the business’s reputation. Finding the right buyer lets you take the next step on your journey, knowing you’ve done all you can to leave your legacy in safe hands.