Types of Business Buyers
Types of Business Buyers
Each buyer who inquires about your business when it is for sale will probably have their own unique reason for wanting to buy. By talking with the buyer, understanding their needs and then placing them in one of the categories below, you can understand what they are looking for so you are better prepared to discuss and negotiate the transaction.
This is generally one person with good financial resources and background or experience for managing and leading a particular business in a particular industry. This type of buyer is usually looking for a particular business that is financially healthy. They are looking for a return on their investment and some flexibility in lifestyle choices. They also believe they can buy and at least maintain the current performance of the business or take it to a higher level.
This is a buyer who has many years of service with a large corporation and has concerns that downsizing may occur. In some cases, they are getting older and have their retirement money tucked away and would like to see what it would be like to run their own business. Franchise businesses are particularly attractive to them as they like the structure and organization that comes from working in this business model.
The buyer of a business can be an existing employee. If the business has strong cash flow and the employee is able to put together a small down payment with the seller carrying back some of the financing, this can be a mutually beneficial arrangement. SBA financing may be an option here—especially if the employee has management expertise.
Investment Buyer or Financial Buyer
All buyers want a return on their investment. However, with investment or financial buyers, this is their primary motivation. Their ability to get financing on a large part of the purchase price as possible is also motivating. They have less interest in the type of industry and many of the specifics of the business operation.
This is usually a company and their purpose of buying the business is their belief that joining the two companies will produce more, or be worth more, together than if the two companies were to remain separate.
This type of buyer is often a competitor or owns a very similar operation. They know the industry well and therefore see little value in paying for the expertise and skill of the seller.
Like the synergistic buyer, the strategic buyer is usually a business owner with a goal to expand their current company. They leverage their expertise to enter into new markets by acquiring market share and then increase market share through the acquisition. Their strategy can also include deploying new technology and/or eliminating a competitor or some competitive element.
If you’d like more information feel free to get in touch with me for a quick consultation. We’ll discuss your particular business, what’s important to you and make a plan for those first few steps.