When planning for the sale of your business, one thing to consider is the different buyer types that are out there. Depending on the type of business, there may be a wide variety of interested buyers. Keep reading for the pros and cons of working with different types of buyers.
Five of the most common types of buyers you may encounter are:
These buyers are individuals who are not affiliated with an external organization. They may be highly experienced individuals who wish to try their hand at entrepreneurship. One benefit of working with an individual buyer is that they have less stings attached, and can be easier to work with. However, almost 50% of small business buyers are also first-time buyers. Because of this, they may require more training and assistance from you after the transaction is complete.
Another common scenario is when a business is purchased by a direct competitor. Businesses often purchase direct competitors to gain market share in their current industry. Because a competitor already has experience in your industry, this type of transaction typically requires minimal post-sale involvement from you. However, if you are planning on selling your business to a competitor, it is important to enlist the services of a business broker, as such transactions can often become more complicated throughout the process.
Synergistic buyers are existing businesses that want to expand their operations into other fields they currently do not operate in. They are not competitors, but may be in a related industry or geography. These buyers are typically interested in business similar to their own that will compliment their current business. One advantage of working with a synergistic buyer is that they may be willing to pay a higher price for your business because of the potential synergies it will realize. However, one issue with these buyers is that they may downsize the business’s staff after the transaction since their roles are often overlapping.
A financial buyer is most interested in maximizing their financial return by investing in a business. If you are interested in continuing to be involved in the business but no longer wish to maintain ownership, this type of buyer may best suit you. Financial buyers may not be willing to pay a premium for your business however, as their goal is to maximize cash flow of the business. This type of transaction requires a high level of planning, such as negotiating your role after the transaction is complete and planning for the ownership transition.
Selling your business to a family member is a common scenario among small business owners. Often, multiple generations are already involved in the business, and your successor has the experience and training needed to take over the business. If this scenario is ideal for you, it is important to begin planning as soon as possible. Succession planning includes determining the value of the business, the structure of the transaction, and each family members role after the transaction is complete.
Beal Business Brokers & Advisors has extensive experience helping sellers work with a variety of buyers to reach their goals. If you are thinking about selling or transitioning your business, contact one of our trusted business advisors today!