How to find the right buyer for your business

How to find the right buyer for your business

If you’re thinking about selling your business, you might be wondering “Who exactly will want to buy my company?”

Understanding the pros and cons of the different types of buyers BEFORE you begin your business sale process can really help you understand how to best plan your exit strategy and market your business to attract the right buyer for your business.

So let’s take a closer look at the five different types of buyers for your business.

The individual buyer

The individual buyer

As the owner of a small to midsize business, more than half of your potential buyers will most likely be individual buyers.

Aged between 40 and 60, these buyers come from the corporate world and are either looking for a lifestyle change, are wanting to downsize, or they have been made redundant.

Although they bring with them business experience acquired in the corporate world; most haven’t run their own business before.

The individual buyer will typically want to be very hands-on in running the business and for them, owning their own business is a dream come true. Your business will be attractive to them because they won’t have to start a business from scratch.

Individual buyers usually have the funds necessary to buy your business but they might feel overwhelmed by what’s involved. Your business broker can spend the time with prospective buyers, walking and talking them through the business sale process, allowing you to keep your focus on running your business.

The business competitor

The business competitor

If your business is profitable and well run, it is highly likely it will be a very attractive proposition to your competitors, who already understand the market and the value and potential of your business.

For your business competitors, buying your business is an easy way to expand their business and their customer database, as well as increase their cash flow. Buying your business also eliminates a competitor.

If you’re thinking of selling to a business competitor it is extremely important to have a secure confidentiality agreement in place.

Your business broker will a digital non-disclosure agreement (NDA) and keep your NDA and other confidential documents securely stored in a Data Vault, which enables legally binding documents to be signed digitally and returned and lodged automatically.

The synergistic or strategic buyer

The synergistic or strategic buyer

Similar to your business competitors, but not a direct competitor, a synergistic or strategic buyer is a buyer who sees your business as one that would complement their existing business.

A good example of this type of buyer would be a pet groomer looking to buy your retail pet store.

The pet groomer is not a direct competitor to your retail pet store, however, by acquiring your business they know they can lower their costs and acquire a whole lot of new customers.

Your business will be extremely attractive to a synergistic or strategic buyer and your business broker can help you use this to your advantage to help achieve the best possible price for your business.

The financial buyer

The financial buyer

Financial buyers are purely interested in return on investment and they will be looking for maximum leverage.

They will want to know how your business compares to other investment options such as other business, shares or real estate.

Because financial buyers have no emotional investment in the purchase of your business and are not looking for a lifestyle change, they are a very good option if you are thinking about continuing to manage your business after it is sold.

This type of buyer will commonly offer a lower purchase price than other types of buyers, so your business broker will play a crucial role in convincing them of the potential for growth, the expected return on investment and helping you negotiate your final sale price.

The family member or employee

The family member or employee

Family members and employees are already very familiar with your business, they usually have worked within the business for years and have built strong and long-lasting relationships with your customers and vendors.

The problem with selling your business to another family member or employee is firstly they might not have the cash upfront required to buy the business and secondly (especially with family members) it can be difficult to take the emotion out of the sale.

By engaging the services of a business broker, you can avoid the business sale negotiations impacting on family or professional relationships and your broker can also help to put in place a repayment schedule that makes it possible for the family member or employee to pay off the business in a series of instalments rather than try to find the total amount upfront.

The best buyer for your business

The best buyer for your business

Each of the five types of buyers has different strengths and weaknesses and this is where a proactive and experienced business broker can prove invaluable to your business sale outcome.

Your business broker will help you to first assess which type of buyers will be the most suitable candidate to buy your business, then target your marketing to attract the right type of buyer, and finally negotiate with an understanding of what motivates these different types of buyers.

A proactive and experienced business broker can help you find the best kind of buyer for your business and achieve a smooth and profitable business sale.

Find out more.