Finding buyers for an existing business can be a frustrating and time-consuming process. Surveys have shown that less than 8% of those who have intentions of buying a business ever do so.
Of those who do, there are many different types of people. One is the strategic acquirer. Not to be confused with competitors, these are buyers who are interested in the synergies that are created when integrating another company into their existing company.
Competitors, suppliers and customers are another group of business buyers. Because of the risks associated with divulging proprietary information to them, this group needs to be approached very cautiously.
Another potential group of buyers is employees. Employee stock ownership plans or selling to an existing manager can sometimes be beneficial. However, if the deal falls through, hard feelings can be the result.
Investors are another large group of buyers. Because of the recent volatility 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.
Career changers have also become a significant pool of buyers. Former middle managers and executives who have taken early retirement packages are eying the advantages of being in business for themselves.
Business sellers should not fall into the trap of focusing all their efforts on a single prospect, regardless of how attractive it might be. If buyers know they are the sole interested party, they are in a position to control the negotiations.
Investors and career changers have certain traits. They typically have a strong business background and a real entrepreneurial spirit. Surprisingly, one trait that is usually not present is a specific knowledge of the business they are buying.
This is a big surprise to many sellers. Many owners believe that there is nobody who can run their business like they can. They rightfully should be proud of this. However, a new owner will usually bring a new set of competencies to the business, which can complement what is already there. The results can be extraordinary.
One of my favorite examples is the junior executive with an international mining company who had strong management and communication skills who ended up buying a flower business.
The other is an attorney who had excellent negotiation and marketing skills who ended up purchasing a subcontracting business.
Even though these two buyers lacked specific in-depth technical knowledge of the business they bought, both are thriving.
Competitors can also bring innovation during an acquisition, but it can also be the other way around.
A recent merger saw the purchaser implementing many procedures into his existing company that he found in place at the business they just bought.
Buzz Harris is a Licensed Business Broker with The Liberty Group of Nevada. Contact him at BHarris@TheLibertyGroupofNevada.com.