Before a broker begins the selling process, it is important to determine where the prospective buyers will come from. A few questions to consider are: Will the buyer have industry experience? Will he be a first-time buyer? What about financing? A business broker should be able to give a preliminary idea or priority list of the most likely type of buyer for a business. You will have a head start if the type of buyer you will be involved with can be identified in advance. By understanding the type of buyer, a seller will be able to anticipate the buyer’s different financing needs, geographic constraints, and list of ideals they wish to have out of the business of their choice. As the old song goes, “you don’t always get what you want, but you get what you need”. A good broker can help buyers understand the bright side of a business, so they don’t get shaken by what could be not what they desire in the buying process.
About 75% of the buyers for small businesses are first time buyers. The majority of these buyers are coming out of corporate America. This type of buyer generally needs some type of financing and will either be a victim of corporate downsizing or will have voluntarily opted out of the corporate America hell. It has been our experience that he will not have a specific industry for which he is searching. Usually, what determines the decision of buying will be determined by a combination of earnings, location, and availability.
Geography is sometimes an important function of decision making. He will typically own a home and be unwilling to relocate since the financial benefits of the deal are usually not large enough to allow for relocation. He wants to replace his recently lost salary with higher income from his new· company. The executive buyer will usually have a quick time frame to pick the business of his choice since he will generally not have the financial ability for a down payment in addition to maintaining his living expenses over an extended period. This type of buyer usually has a professional resume, college degree, and good credit, making him a candidate for SBA financing which will afford a seller the maximum amount of cash at closing.
Competitors / Vendors
Due to confidentiality, competitors/vendors should be approached with caution and a last resort to pursue. Even though either group may be the best buyer candidate, in many cases, they should be the last prospects to approach. It is a good idea to proceed on a prospect-by-prospect basis when contacting the competition.
To sell your business to the right buyer, contact Chad Peterson at (913) 647-7500 for a consultation.