Attracting buyers for a business is a double-edged sword. Wide-open promotion that a business is for sale can be disastrous, but the only way to find a buyer is to communicate that a business is for sale.
As with any kind of marketing, sellers need to understand their target market. Business owners are no different – they need to identify who the potential buyers of their company are.
There are numerous different types of buyers. One is the strategic acquirer. Not to be confused with competitors, these are the buyers who may be interested in the synergy’s that might be created by purchasing another company. For example, if a business is local or regional, a similar business operating in a different area may be interested in expanding into a new market. Or it may be interested in a business’ distribution channels, technology, product mix.
Investors represent another potential group of buyers. Because of the recent volatility and poor performance of the stock market, many investors have realized that as a business owner, the return on their investments can be significantly greater when successfully operating their own company. Also, there are a large number of buyers who have recently relocated to our area who, due to significant home equity gains, are looking to be their own boss. We’re seeing more and more of these types of buyers who are relocating to northern Nevada from California.
Career changers are also becoming a significant pool of buyers. Former middle managers and executives who have taken early retirement packages are eyeing the advantages of being in business for themselves. For some, it isn’t just the money they’re dreaming of, it’s the desire for more control over their investments, their time and their lives.
Employees are another potential group of buyers. Employee Stock Ownership Plans can sometimes be beneficial to both parties, but they can easily backfire, especially if the deal falls through. That can create hard feelings. Another possible employee buyer is a present manger; however, he or she often doesn’t have much capital. This causes sellers to carry back a larger note than they might normally consider.
Competitors, suppliers and customers make up another large group of business buyers. Although often maligned because of the risks associated with divulging proprietary information to them, this group when handled appropriately can represent an attractive prospect list. Our office recently managed the confidential introduction of two competitors to one another, which ultimately resulted in a successful merger, which was kept quiet from other competitors, industry suppliers and customers.
Seller must not fall into trap of focusing all their efforts on a single prospect, no matter how attractive they may seem. There’s an important rule to remember when selling your business: One buyer is the same as no buyers. If the buyer knows he or she is the sole interested party, he or she is able to control the negotiations. This is a main reason why sellers should turn to a professional business broker when deciding to sell. Also, in today’s uncertain market, it’s more important than ever to separate the timewasters (i.e. those who think they might like to buy but aren’t ready for it) from serious buyers.
By allowing a skilled broker to confidentially guide sellers through the sales transaction step by step, owners will be able to concentrate on their job – making their business as profitable as possible.