Buyers come in many forms
July 31, 2017
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 for their company are.
There are numerous different types of buyers. One is the strategic acquirer. Not to be confused with competitors, they are buyers who may be interested in the synergies that may 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 to a new market. Or it may be interested in a businesses distribution channels, technology, product mix, etc., which would strengthen its existing infrastructure or product mix.
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.
Investors represent another potential group of buyers. Because of the recent volatility and performance of the stock market, many investors have realized that as a business owner, the return of their investment can be significantly greater when successfully operating their own company. Also, there are a large number of buyers who have recently located to our area, due to the significant home equity gains, are looking to be their own boss. We're seeing more and more of these types of buyers relocating to Northern Nevada.
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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. They can create hard feelings. Another possible employee buyer is a present manager; however, he or she often doesn't have much capital. This causes the sellers to carry back a larger note than they might normally consider.
Competitors, suppliers and customers pick up another large group of business buyers. Although often maligned because of the risks associated with devoting proprietary information to them, this group when handled appropriately can represent an attractive prospect. Our office recently managed a 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.
Sellers must not fall into the trap of focusing all their efforts on a single prospect, no matter how attractive they may seem. There's an important role to remember when selling your business: One buyer is the same as no buyers. If one buyer knows he or she is the sole interested party, he or she is able to control the negotiations. This is the 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 time wasters (i.e. those who think they might like to buy but aren't ready for it) from the 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.
Buzz Harris is a licensed business broker with The Liberty Group of Nevada. BHarris@TheLibertyGroupofNevada.com or 775-825-3948.