Once the decision to sell
has been made, the business owner should be aware of the variety
of possible business buyers. Just as small business itself has become
more sophisticated, the people interested in buying the businesses
are becoming more divergent and complex. The following are some of today's most
active categories of business buyers:
Members of the seller's own family is a traditional category of
business buyer: tried but not always "true." The notion
of a family member taking over is amenable to many of the parties
involved because they envision continuity, seeing that as a prime
advantage. And it can be, given that the family member treats the
role as something akin to a hierarchical responsibility. This can
mean years of planning and diligent preparation, involving all or
many members of the family in deciding who will be the "heir
to the throne." If this has been done, the family member may
be the best type of buyer.
Too often, however, the difficulty with the family
buyer category lies in the conflicts that may develop. For example,
does the family member have sufficient cash to purchase the business?
Can the selling family member really leave the business? In too
many cases, these and other conflicts result in serious disruption
to the business or to the sales transaction. The result, too often,
is an "I-told-you-so" situation, where there are too many
opinions, but no one is really ever the wiser. An outside buyer
eliminates these often insoluble problems.
The key to deciding on a family member as a buyer
is threefold: ability, family agreement, and financial worthiness.
This is a category often overlooked as a source of prospective purchasers.
The obvious concern is that competitors will take advantage of the
knowledge that the business is for sale by attempting to lure away
customers or clients. However, if the business is compatible, a
competitor may be willing to "pay the price" to acquire
a ready-made means to expand. A business brokerage professional
can be of tremendous assistance in dealing with the competitor.
They will use confidentiality agreements and will reveal the name
of the business only after contacting the seller and qualifying
THE FOREIGN BUYER
Many foreigners arrive in the United States with ample funds and
a great desire to share in the American Dream. Many also have difficulty
obtaining jobs in their previous professions, because of language
barriers, licensing, and specific experience. As owners of their
own businesses, at least some of these problems can be short-circuited.
These buyers work hard and long and usually are
very successful small business owners. However, their business acumen
does not necessarily coincide with that of the seller (as would
be the case with any inexperienced owner). Again, a business broker
professional knows best how to approach these potential problems.
is that many small business owners think that foreign companies
and independent buyers are willing to pay top dollar for the business.
In fact, foreign companies are usually interested only in businesses
or companies with sales in the millions.
These are buyers who feel that a particular business would compliment
theirs and that combining the two would result in lower costs, new
customers, and other advantages. Synergistic buyers are more likely
to pay more than other types of buyers, because they can see the
results of the purchase. Again, as with the foreign buyer, synergistic
buyers seldom look at the small business, but they may find many
mid-sized companies that meet their requirements.
This category of buyer comes with perhaps the longest list of criteria--and
demands. These buyers want maximum leverage, but they also are the
right category for the seller who wants to continue to manage his
company after it is sold. Most financial buyers offer a lower purchase
price than other types, but they do often make provision for what
is important to the seller other than the money--such as selection
of key employees, location, and other issues.
For a business to be of interest to a financial
buyer, the profits must be sufficient not only to support existing
management, but also to provide a return to the owner.
When it comes time to sell, most owners of the small to mid-sized
business gravitate toward this buyer. Many of these buyers are mature
(aged 40 to 60) and have been well-seasoned in the corporate marketplace.
Owning a business is a dream, and one many of them can well afford.
The key to approaching this kind of buyer is to find out what it
is they are really looking for.
The buyer who needs to replace a job is can be
an excellent prospect. Although owning a business is more than a
job, and the risks involved can frighten this kind of buyer, they
do have the "hunger"--and the need. A further advantage
is that this category of buyer comes with fewer "strings"
and complications than many of the other types.
Sorting out the "right" buyer is best left to the professionals
who have the experience necessary to decide who are the best prospects.