When it comes to business buyers, there are typically 3 main types of buyers. These buyer types have unique motivations and come with different sets of wants and needs, which are important for a seller to understand. Knowing where the other side is coming from and what motivates them can often lead to a more successful negotiation and will hopefully provide a smoother sale process overall.
Individual buyers often include a first-time buyer looking to escape the corporate life and control their own path, as well as serial entrepreneurs who have already successfully exited a business and are looking to take over another business. Most of our individual buyers are relocating from out of state or could be coming from another country entirely by obtaining an E2 visa. Visa buyers are purchasing a business here so that they are allowed to live and work in the United States. Pre-Covid, they made up a significant percentage of our buyers, and they are starting to come back now that life is slowly getting back to normal. E2 buyers need to be looking at a business which has solid financials, at least 1 or 2 employees, and a purchase price of $100,000 or more.
Individual buyers often aren’t familiar with the business sale process, so it’s important that they understand what’s happening at each junction of the process. They are typically looking to purchase a business as an “owner-operator.” They will be running the business themselves and will be a vital part of the day-to-day operation of the business they purchase. Individual owners are often most concerned with the owner benefit providing enough income to support themselves and their family. They are also looking for a business that will be easy for them to run, given their experience, skill set, and passion.
Investor buyers may include private equity groups who are looking to put their investors’ money to work in a scalable business, family offices who are looking to invest money from a high-worth family, or individuals who we call "new investors" backed by other investors (with the funds) looking to buy a business and get a return. Right now, there seems to be a flood of investors out there inquiring on any and every business. Some are legitimate, like true private equity groups or family offices, and some are just “dreamers or schemers” posing as investors to get confidential company information to use for their specific purposes. So, us as business brokers are being more vigilant than ever to make sure we are screening the buyer inquiries we get on all of our listings. If an interested party seems to be an “investor,” this will trigger more investigation and digging on our part to ensure that they are a legitimate investor with the motivation and ability to purchase the business.
Different investor buyers will have varying protocols and processes when it comes to deciding on which business opportunities to explore, making an offer, and going through the sale process. All of them operate just a little bit differently, and each business sale is highly unique, so all parties will be working to navigate the sale as best they can. With an investor buyer often comes meetings with boards and shareholders as well as attorneys and accountants. Investors will sometimes need to purchase the business as a stock sale rather than our typical asset sale, so that does throw some extra complications into the mix, but it’s not uncharted territory. Your business broker should be able to help you understand the complexities of the deal and help you through it.
Synergistic or Strategic Buyers
Strategic or synergistic buyers may include businesses in the same industry looking to grow their market share via acquisition (competitors), businesses looking to expand their offerings by acquiring a complimentary business, and businesses looking to grow vertically by acquiring up or down the supply chain. These types of buyers are going to be looking more at sales and revenue numbers, because they will often be shaving off a big chunk of the expenses, since they already have those essential business functions in place. Things like payroll, software, utilities, and even rent they will be able to absorb into their current business operations, and it means adding even more owner benefit to the bottom line for them.
Sometimes synergistic buyers are the most qualified buyers that you’re ever going to find. They are already businesspeople, which means they have verifiable finances and a vast reputation in the business community. Also, by selling to a strategic buyer, you are selling to someone who can run your business properly because they already have a similar undertaking of their own in either the same or related industry that they are running too. So, they know the ins and outs of the market and how to find success. That way, you can be sure that you’re leaving your business with a buyer who isn’t going to run it into the ground it as soon as you leave. This type of sale usually is a big win-win situation for both buyer and seller.