Who is the Buyer for Your Business?

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While you may not currently know the answer to this question, understanding the different types of buyers (and their motivations) allows you the ability to position your business in a way that makes it most attractive to the broadest audience.

Individual Buyers – Individual business buyers are individual people just like you and me. This person will typically only ever purchase one business in his/her lifetime. They are looking for independence and freedom. They want to create personal wealth and/or develop a legacy for their family. An individual buyer understands that with business ownership there are sacrifices, both personal and financial. But, these sacrifices are worth it to them (within reason) in order to obtain freedom of thought, schedule and decision. The most important characteristics of business targets for individual buyers are location (proximity to their home and their families), stability and track record. Most individual buyers have significant experience in the workforce and have developed some level of success there. While they are looking for freedom and independence, they are also looking to maintain their current standard of living. Earnings history, a proven track record and stability are extremely important.

Strategic Buyers – Strategic buyers include public and private companies both foreign and domestic. These buyers already own and operate existing businesses and are looking to grow or vertically integrate their operations. Attractive acquisitions will allow these companies to diversify their product base, expand their market reach, acquire intellectual property, shorten their research and development cycle or achieve cost savings. The most important characteristics to this group are size, market share, reputation, developed technology, trademarks, patents, trade names, a skilled workforce and recognizable quality products and/or service. These buyers are looking to grow their companies and expand their corporate footprints by means of acquisition.

Financial Buyers – Financial buyers include angel investors, private equity firms and investment funds. These buyers are looking to acquire existing companies with the potential for substantial growth. While the acquisition target may lack a sophisticated management team and capital for growth, these buyers typically bring such resources to the table. They are professional business buyers with serious capital and sophistication. They are looking to infuse their talents and money into an existing organization, grow it exponentially and sell it in a relatively short timetable for a significant return. As you may reasonably estimate, these buyers are inundated with acquisition opportunities and afforded the luxury of sifting through candidates before settling on their selection. In order to make the grade with this group you must offer stable yet substantial returns with the opportunity for quick growth and a planned exit.

All three buyer types vary in their desires and their approach. Knowing their motivation allows you to position your business so that it is appealing to the broadest audience.