You can sell your business to the right buyer (and avoid major headaches) with a basic understanding of the types of business buyers and where to find them. Chances are you’ve never done this before, and almost certainly not enough to become an expert. Sometimes, you only get one shot to sell to the right buyer, which can quickly become overwhelming without the right connections and experience.
If you have built a successful business, you already have experience with marketing, accounting, and sales. You have developed the necessary skills to manage relationships with employees, suppliers, and customers.
And you probably collected a full contact list (or SalesForce database, or even a Rolodex) of everyone it takes to operate your business. But you probably think you don’t have connections to those who may be interested in buying your business.
Fortunately, that won’t be a problem if you take the correct approach. Selling your business is a process, and preparedness for that process can’t be overstated.
Most owners have more options than they realize. Thanks to a proliferation in financing techniques, changes in attitudes, and many other factors, today’s buyers come from an increasingly diverse range of backgrounds and group sizes.
A short list of potential buyer groups might look like this:
Potential business buyers fall into one of three general buckets:
Business associations, sometimes called industry trade groups or sector associations, are a natural starting point. These are made by companies or intermediaries with common interests in your sector. The classic role of industry organizations is to represent their members and provide collective services.
This should be an easy start if you have a lot of peer connections. If you are less certain, try a keyword search through The American Society of Association Executives.
Put the word out that you are looking for business buyers. Many organizations have trade-group newsletters or other publications where you can place an advertisement. Place calls and follow up with letters or emails.
You should work with specialists with useful contacts outside your business circle. These include your accountant, business intermediary, broker (if you have already sought one out), attorney, financial advisor, or business consultant. If you have worked with investment bankers or other business financing experts, even better.
These experts can leverage their networks to your advantage and, in some cases, even help refine your sales approach.
Reach out to the Young Presidents’ Organization (YPO), Women Presidents’ Organization (WPO), and Vistage International – just a few of many peer advisory groups for executives, CEOs, and owners. YPO has more than 450 chapters in 130 countries, Vistage has 45,000 members from 35 countries, and WPO has more than 2,000 members in 145 chapters worldwide.
Some buyer groups specialize within a known geographic or urban region. Your local Chamber of Commerce and Rotary Club are obvious networks. You might find nearby businesses (or their employees), suppliers, or local investors within these.
Self-proclaimed as the internet’s largest business-for-sale marketplace, BizBuySell claims to have more than 900,000 buyers registered, more than 65,000 business listings annually, and over 15 million monthly page views. You can also list your business on DealStream, which created the first online buyer database for business-for-sale transactions in 2012. Business Buyers Directory is another option. Most states and some cities have local buyer databases and listing options.
There are brokers for business sales, just as with houses and stocks. These experts combine large professional networks with a technical and legal understanding of the process. These range from standard business brokers to investment bankers.
You may be unsure about hiring an intermediary and wondering, “Is it necessary?”
In many cases, yes, but not always. Business brokers exist to solve an information asymmetry, namely that owners often don’t know who the right buyer is or how to find that buyer. They charge for this service. You should be sure that the benefits you receive from an intermediary outweigh the costs.
Imagine you are selling your house. The real estate market in your area is extremely active, and prices are strong. Moreover, you are already connected to many prospective buyers through your social or professional life. In this case, you probably don’t need a real estate broker, especially if you have the time to devote to marketing.
Now, imagine you are selling in a cold market. You are also busy and not confident that you have the right connections. There is a risk your home may be listed for months and receive little buyer attention. That is a lot of uncertainty. This is the perfect scenario for a broker hire.
Apply the same mental exercise to your business. Is a business broker or investment banker worth the cost? Or can your transaction team (you and your accountants, attorneys, etc.) find the right business buyer? If there is too much uncertainty, it may be time to add an intermediary.
We think you’ll also like:
[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):
This is an updated version of an article originally published on March 16, 2020.]
©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
Michele has been a director with Financial Poise since 2012. Share this page: