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How to Find a Buyer for Your Business

How to find a buyer for your business

Selling your business is a significant milestone in an entrepreneur’s journey. For many entrepreneurs, finding the right buyer is the capstone of their hard work and reflective of their dedication to pre-sale planning. Whether you’re planning to retire, start a new venture, or simply want to hand over the reins to someone else, understanding how to find the right buyer when you’re ready to sell your business is critical.  It’s tempting to latch onto the first interested party, but patience and due diligence can pay off. This blog post will guide you through the process of identifying and securing the right buyer for your business.

Cast a Wide Net for Buyers 

To attract the right kind of buyer you will want to cast a wide net.  By reaching out to a range of sources, you’ll open up more opportunities for finding the best fit buyer. Consider these options: 

1. Engage a Business Broker or M&A Professional

One essential player on your expert team to sell your business is a business broker or M&A professional (in some cases, an investment banker). This person will help you identify potential buyers and negotiate the right terms. When you combine working with a qualified wealth manager and a business broker, you can keep your personal financial interests at the forefront of the sale.   

2. Share with Your Network

When you are ready to sell your business, reach out to those people in your network that you have identified as potential buyers or connectors.  They can be a valuable resource to identify the right buyer.  As you will see below, your network may be where you can find the right buyer at the time when you need one.  

3. List it on Appropriate Market Places

Depending on the type of business you own, one option is to list your business on online platforms that specialize in business sales, such as BizBuySell, Flippa or FE International.  

Don’t overlook due diligence as you evaluate these options. You’ll want to understand if the platform is suitable for your type of business, what the security protocol is to protect your confidential information, what the commissions and fees are, and how much support you receive. Be sure to read customer reviews and find out about their track record. 

Types of Buyers You May Encounter 

Buyers don’t come as “one size fits all.”  You need to be able to recognize what type of buyers you may encounter, so you can direct your resources in a manner that best serves your desired outcome.  Here’s a look at a variety of buyer types: 

1. Tire Kickers and Window Shoppers: These individuals can significantly drain your time and resources. Tire kickers simply want to “see what’s out there” while window shoppers are “trying on” a fantasy of owning a business. Neither is going to follow through on a sale as they are dreamers who may not even have the money to buy.  They keep you busy and distracted, risking the loss of real offers and opportunities.

Finding the right buyer for your business 22. The Strategic Fishing Trip: Beware of buyers who seem more interested in gleaning proprietary information than in actually purchasing your business. These can be the riskiest encounters, as they may disguise themselves as legitimate strategic buyers. To fend off these buyers, be sure to include language in your letter of intent that if the deal fails to proceed without agreed-upon cause, the potential buyer will pay you a break-up fee.   

3. Bargain Hunters: Bargain hunters prey on distressed businesses and can be a threat if you’re in a vulnerable position. It’s important not to be swayed by their tactics, especially if you take the time to do thorough preparation to sell your business.

4. Internal Buyer: An internal buyer for a firm is typically someone who is already involved with the company, such as a manager, executive, or group of employees. They have a vested interest in the ongoing success of the business and are likely familiar with its operations, culture, and strategic goals. 

Opting for an internal sale often means a smoother transition, as the buyer already understands the business and its clients. However, internal buyers may face challenges in securing enough capital to purchase the company, leading to creative financing solutions such as seller financing or leveraging buy-sell agreements backed by insurance policies. 

This kind of sale can protect the legacy of the business and ensure continuity, but it also requires careful structuring to ensure the new internal owner can successfully sustain and grow the company post-acquisition and you, as the seller, achieve the financial outcomes you desire.

5. Strategic Buyers: These buyers often provide the best deals, valuing your business for its strategic fit with their own operations.  Strategic buyers tend to be from the same industry and are looking for a consolidation which means your business may have a greater potential value to them.  With keen negotiation, you can get a higher multiplier of EBITDA – (earnings before interest, taxes, depreciation, and amortization) than with other types of buyers. 

6. Lifestyle Buyers: A lifestyle buyer is someone who purchases a business for the personal satisfaction and lifestyle it offers beyond just financial gain. They often seek businesses that align with their personal interests, passions, or the desire for a particular way of living. 

Lifestyle buyers typically intend to be directly involved in the day-to-day operations of the business, and their goals for the business often include preserving its core values and maintaining its existing culture. This type of buyer can offer fair value for a business, but their offers may not be as high as those from strategic or financial buyers. 

7. Investor Buyers: An investor buyer, typically from private equity firms or family offices, approaches the acquisition of a business as a financial investment rather than a personal enterprise. Their primary focus is on the financial returns the business can yield. To maximize these returns, investor buyers often leverage financing options and may install a professional management team to handle daily operations. The goal is to improve the company’s value for eventual sale or other exit strategies, and they typically seek to acquire businesses at a multiple of EBITDA.

Investor buyers are known for their rigorous negotiation tactics, as they aim to secure a deal that minimizes their investment risk and maximizes returns. They tend to enforce stringent terms in purchase agreements, especially in the Representations and Warranties section, to safeguard against any future claims that could affect the financial success of the investment. While the negotiation process with investor buyers can be challenging, it is possible to reach an agreement that is mutually beneficial, provided sellers are well-prepared.

Maintain an Active List of Prospective Buyers

One important strategy in your pre-sale planning (and even long before you intend to sell) is to keep an active list of potential buyers who are in your professional network. Who would buy your business if you needed to exit quickly?  

Network continuously, with an endgame in mind, to maintain and nurture a roster of potential buyers who could step in if the need arises. Expect to include competitors who would be eager to buy your firm. This may not be your go-to list if you’re seeking maximum value on the sale and you have the time to conduct a thorough search for a buyer, but you can rest assured that options exist if you are in a situation where you need to exit immediately.  

Dress Your Business to Match Buyer’s Desires

Know what buyers are looking for and make the way you present your business reflect those desires. It’s not only about showing your business in the best light; it’s also about making your business the priority for buyers over your competition. 

1. What traits are they looking for in a business? 

A good buyer will ask many questions.  Listen carefully to your buyer’s requests and be sure to read between the lines.  Don’t be afraid to probe and ask your own questions. The objective here is to determine what  the buyer is interested in so you can position the sale around what they care about.

2. How do they like to do their accounting?

Asking about accounting can reveal how they value businesses and their approach to financial management. Based on their answers, you may be able to normalize your books into the format the buyer prefers. This way it is easier for them to interpret your accounting which may positively affect the terms of the sale. 

Finding the right buyer for your business 13. What type of business processes do they prefer?

With input about their preferred business processes, you can demonstrate where there is alignment with their approach, giving them confidence in the operational continuity of the business after the sale.  While this assumes that their expectations align with the existing framework of the business operations, asking the question will let you know how much emphasis to place here.   

If you’ve put together prepackaged due diligence, you will be able to highlight the parts that resonate most with the buyer’s interests.  

Tips for Finding the right Buyer

1. Be patient. Find the RIGHT buyer.

There is no such thing as a perfect buyer, there is such a thing as a preferable one. Working with your wealth manager, set buyer qualifications in a contact worksheet that you send to your broker before you start identifying possible buyers.   

2. Pre-qualify buyer prospects

Pre-qualifying potential buyers is a crucial step often overlooked. Failing to do so can lead to wasted resources and missed alternative opportunities. For each potential buyer, match them against your qualifications and document their contact details, indication of the buyer’s intent, and their ability to pay, which will be invaluable in your discussions with M&A professionals.

3. Does the buyer have the skill set to run your business

Assess whether the potential buyer has the required skill sets to run your business. Even after the sale, the continued success of your business can impact your legacy, including your reputation and the well-being of your former employees and customers.  

Work with a Broker 

As mentioned earlier in this article, engaging with a business broker, M&A professional, or investment banker can aid in avoiding pitfalls that arise with selling a business. These experts can recognize serious buyers and help protect your business from those just ‘kicking tires’ or on a ‘fishing trip.’  

A business broker or M&A specialist primarily assists with valuing your business, marketing it to prospective buyers, qualifying those potential buyers, and then negotiating the sale terms. They have access to a vast network of buyers and are adept at ensuring confidentiality throughout the process. Their expertise in various industries can help navigate market trends, valuation methods, and legal intricacies involved in a transaction.

During the closing of the deal, they manage the essential paperwork and work with your attorney through the legal aspects, which can be complex. These professionals operate on a commission basis, typically receiving a percentage of the final sale price, aligning their interest with achieving the best possible outcome for you as the seller. Choosing the right broker involves considering their experience in your sector, track record, and your comfort level with them as they represent your interests in the market.

How Avion Wealth Can Help

Finding a buyer for the sale of your business is much easier when you work with a partner who not only grasps the financial importance of the transaction but also appreciates the personal and emotional impact of this major transition. Our expertise in wealth management for business owners preparing to exit is designed to support you through this intricate process.

We can help you identify a business broker who is a good fit and work with them and you to ensure each financial move fits your overarching objectives and values. 

Our support extends beyond the transaction. After the sale, we remain by your side to oversee the wealth you’ve accumulated, aiding in asset growth and preservation for future generations or whatever new ventures lie ahead.

If you’re ready to start this journey with the right approach and the right partner, reach out to us to arrange a discussion.  

Founder & CEO at Avion Wealth

Paul is the founder and CEO of Avion Wealth, LLC. He leads a team of wealth managers in building and executing financial plans for high net worth individuals and families. Contact Avion Wealth to speak with a financial advisor.