When selling, business owners should realize that there are many different types of prospective buyers. Today’s buyers are more diverse and sophisticated than ever before. Below is a list of different types of buyers and what you should know about each of them.
1. Family Members
Family members often buy businesses from other family members. One reason this happens is because a family member is already familiar with the business. Selling to a family member can work if that family member has prepared years in advance for the responsibility of owning the business.
However, there are some potential problems when selling a business to a family member. The family member could lack the cash to buy the business, or the family member could be unprepared to run the business. A family member that buys a business must be ready for the responsibility or the business can suffer a range of disruptions leading to a loss of business. An outside buyer usually solves the problems that come along with a family member buying a business.
2. The Individual Buyer
Owners of small to mid-size businesses usually like the idea of selling to an individual buyer. These buyers are older and bring with them a good deal of real world business experience acquired in the corporate world. Many individual buyers have the funds necessary to buy.
Often an excellent candidate is an individual buyer who is looking to replace a job that has been lost or downsized. On the downside, individual buyers quite often have not owned a business before and may be intimidated by what is involved. Overall, the individual buyer is often easier to deal with than other types of buyers.
3. Business Competitor
When it comes time to sell, it is common for business owners to look to their competitors. Since a competitor already understands the business and will likely see the value, selling to a competitor makes sense.
A buyer may see buying a similar business as an easy way to expand and increase cash flow. It is extremely important to work with a business broker in this situation. By going through a business broker, it is possible to have a secure confidentiality agreement in place. This way the prospective buyer doesn’t learn the name of the business or other details before signing the agreement.
4. The Foreign Buyer
Foreign buyers often have the funds they need and look at buying an existing business as a way of addressing issues such as licensing difficulties, language barrier and other problems. Business brokers can be very helpful when working with foreign buyers, as they have experience with the obstacles a foreign buyer may face.
5. Synergistic Buyers
A buyer that feels that a particular business would complement his or her existing business is a synergistic buyer. The thought is that they can combine the two businesses and in the process acquire new customers and lower their costs. That is why they are often willing to pay more than other buyers.
6. Financial Buyers
Financial buyers can come with a long list of criteria, demands and complications. However, with the assistance of a business broker, financial buyers can still be good prospective candidates.
It is important to remember that these buyers are often a good option for the seller who wants to continue to manage a company after it is sold. Financial buyers usually offer a lower purchase price than other types of buyers. Buying the business is strictly for financial purposes. Financial buyers are looking for a business that is generating sufficient profits so as to support the business and provide a good return to the owner.
EBIT can help you find the right kind of buyer for you. Every buyer is different and every business is different. Working with EBIT can help you navigate the possibilities so you find the right buyer for your business.