Motivated Business Buyers When Selling A Company
There are a few different types of motivated business buyers that business owners should be aware of when selling their business.
One type is the strategic buyer, which is a company that is looking to acquire another company to expand its operations. Strategic buyers are often interested in businesses that have strong brands or valuable patents and trademarks.
Another type of motivated buyer is the financial buyer, which is a company that is looking to purchase a business to generate income from it through rent, dividends, or other means. Financial buyers are often interested in businesses with stable cash flows and high-profit margins.
Finally, there are also private equity firms and venture capitalists who are interested in buying businesses to resell them later at a higher price. These types of buyers are often interested in businesses that have the potential for growth and expansion.
The reason it matters to business owners looking to sell their business in California that they understand the different types of motivated buyers is because it can help them to price their business correctly and market it effectively.
See also the 7 types of buyers, understanding their acquisition goals, will make you plan your exit smoothly and on your terms
Businesses that are attractive to strategic buyers may be able to fetch a higher price than businesses that are attractive to financial buyers, for example. Business owners need to have a clear understanding of what their business is worth so they can get the best deal possible when selling it.
The process of selling a business can be lengthy, frustrating, and overwhelming. If you own a business and are ready to sell, one of the best ways to achieve your goal to sell your business at the highest price and in the shortest time possible is to know what’s important to you.
This includes knowing what you will not accept so you can state it up front and not waste time sharing confidential information with that type of motivated buyer.
To help you achieve the above, how would you answer the following questions as honestly as you can?
- Are you willing to work in the business after it sells or do you want to go and do something completely different?
- If you are willing to stay, for how long and how much compensation will you need to make it attractive to you to stay, and can the business support it?
- If the buyer wants to do things differently in the business compared to what you have been doing, are you OK with this? For example, the buyer may wish to move the business to a different location, fire some of your key employees, bring in his own, sell off certain pieces of the business or close down some parts of the business or more.
- Do you want to sell as quickly as possible and therefore take a good offer or is your preference to wait longer with the expectation of getting a higher price?
Using the above questions to clarify your thoughts allows you to start putting a clear exit plan together and just as importantly, know the type of buyer you want that you feel will meet your goals.
Does your business have value?
Now you have an honest and clearer picture of what’s important to you, let’s have a look at the business and what you are selling.
The first question to ask is; does your business have a value that would be attractive to a buyer? For a buyer to have the motivation to buy a business it must come with the following.
- A set of financial statements that show a strong performing business that has enough profit for a buyer to be willing to make a down payment and generally get finance from a third party be it as equity and/or debt.
- Are the financial statements well presented with their net book value plus intangibles that don’t appear on the balance sheet such as good standing in the industry and community that is reflected in its brand?
- Does it have a competitive advantage? If so, the greater the competitive advantage the more attractive it is to more buyers.
- Does it have a loyal customer base? If so, the larger the customer base the more attractive it is to more buyers.
- Is the industry the business is in at least steady and hopefully growing? The greater the growth the more attractive it will be to more buyers.
- Does the business have a strong management team?
How do you choose the right price for your business?
If your business has value based on the guidelines we covered above, what price do you ask for your business?
If your price is too high compared to similar businesses it will more than likely make it harder to sell. If your price is too low then obviously as the seller, you may leave money on the table. It’s my experience almost without exception that a seller thinks the price of their business is higher than others. If the price asked is too high it will discourage buyers from seriously looking and then making an offer.
See the recent study showing buyers are more interested to acquire a service business or recession-proof business.
If you like being different, very few sellers offer a strategic plan on the direction with the strengths of their business and potentially new opportunities. If you can provide a written document to a buyer it may be enough to set you apart and impress a buyer who has their thoughts and ideas but when they read your plan, dovetail in very nicely to make them move forward with their offer.
Understand the different types of motivated buyers
There are different types of motivated business buyers with different types of acquisition goals. As a business seller, if you can understand the different types of motivated business buyers when they first approach you about buying your business, you can then adjust your pitch accordingly.
Very simply, there are three kinds of buyers:
- Financial buyers
- Strategic buyers
- Owner/operator buyers
Let’s take a quick look at each of them.
Motivated financial business buyers
To understand what motivates financial buyers, you need to know the primary motivation of financial buyers is the price. That’s because they want a return on their investment.
They are generally professional investors such as investment companies and private equity groups. Their business model is to acquire a business at an attractive price and sell it in the future.
Motivated strategic business buyers
The primary motivation of strategic buyers is gaining market share and dominating it so they have pricing power. They may be one of your competitors be it directly or indirectly but the larger they make their company through acquisitions the greater their motivation.
These are companies already operating in your niche, often much larger companies than yours. Or, they could be companies with lots of positive cash flow who want to expand quickly by buying up as many smaller businesses as possible.
Often a strategic buyer may pay a higher price to take you out as a competitor fits their business model but they may also make lots of changes to your business as once they buy your business it is definitely about them and the direction they wish to go.
Motivated owners/operators business buyer
The primary motivation for an owner/operator buyer is to create an above-average income that flows from their business and provides a nice lifestyle.
They generally wish to run the business themselves and may get help from family members. Often this is the first business they have bought and may be very risk-averse as they move outside their comfort zone.
If you are ready to sell your business, know what’s important to you, understand the value drivers of your business, have it priced correctly, and know different types of buyers may have an interest in buying your business your chances of success are high.
Are you considering putting your IT MSP business for sale in California? See how to get motivated buyers’ list
Remember the most important emotion all humans want to avoid is fear be it the fear of failure or the fear of making a mistake. As the seller, if you can help mitigate a buyer’s fears whether they are real or imagined, you have just increased your chances of success in achieving your goal.
Are you thinking about selling your business? Would you like to know the value of your business? If you would like more information please visit my website Business valuation.
Selling your business to the right buyer by attracting multiple motivated business buyers doesn’t have to be difficult.
By understanding these different types of motivated business buyers – knowing what buyers are looking for, finding out what they’re willing to pay, looking for buyers in the right places, and negotiating the best price – you can increase your chances of finding the right buyer and getting the best price for your business.
Are you ready to sell or need some help deciding? Contact us today at this toll-free number (844) 414-9700 or simply email us at firstname.lastname@example.org
Rogerson Business Services: Why Hire Their Expertise
Overall, by working with a qualified business broker during your sell-side process and strategic due diligence, you can feel confident that all aspects of selling your business in California will be handled with care and expertise.
With their help, you will be able to sell your business at top dollar. Here are some of the valuation tactics that Rogerson Busienss Services, expert brokers in California help you achieve your goal:
- How To Increase Company Valuation? 4 Value Drivers You Need To Know
- What is Quality of Earnings Analysis: Sell a Business Due Diligence in California
- Adjusted Financial Statements When Selling a Business in California
- SDE Adjustments To Make Before Selling a Business in California
- How Do I Calculate The Value Of My Business To Sell In California
- What is My Business Worth? | Valuing and Selling Your Business
- How Much is a Business Worth to Sell | Determine Business Worth
- Income Approach Valuation | Finding Business Worth Easy
- How To Value A Business Quickly: Best Business Valuation Formula
- Seller’s Discretionary Earnings (SDE) Valuation | Selling a Business in California
- Financial Due Diligence When Selling a Business
Do you have any questions about how to value a company? Leave a comment below and we’ll be happy to help!
If you are thinking about valuing and selling your business in California, then working with a broker is a great option. A broker can help you get the best price for your business by doing things like valuing your business correctly, finding the right buyer, and negotiating the best terms. If you are ready to sell your business, contact Rogerson Business Services today.
Andrew Rogerson is a certified business broker based in Sacramento, California. Call Toll-Free at (844) 414-9700 or email him at email@example.com services the whole state of California.