When the time comes to say goodbye to the daily grind, you want to get as much out of the sale of your business as possible. To do this, of course, you need a buyer, but who exactly is buying businesses these days? More specifically, who’s buying your kind of business? There are three main categories of buyers—the job seeker, the investor and the strategic buyer—and each one is looking for something different. The buyer you’re looking for is going to depend a lot on the size of your business.
The Local Mom and Pop Shop
Job seekers are looking for something local, something small they can build for the primary purpose of personal income. Small means less than $250,000 in profit or EBITDA. So if you’re running a local coffee shop, you’re most likely to turn the head of this type of buyer. The job seeker buys a business primarily through a business broker, so talk to your trusted advisors to find a broker with a solid reputation.
The next tier of buyers skips from small businesses to large, meaning at least 2.5million EBITDA. These are the investors, private equity firms looking for companies they can buy, grow and sell in 2-5 years for a tidy profit. These firms get their buying power from groups of investors who contribute with the expectation of a good return. If yours is the type of business investors would be interested in, an investment banker will list your business and seek out buyers for it. Again, talk to your advisors to find an investment banker you can trust.
The Competitive Enterprise
Strategic buyers are similar to investors, but their reason for buying goes beyond potential profits to include the bigger picture. For example, if your company has a niche market they'd like to get into, purchasing your organization would go a long way toward expanding their market share. Or a competitor might be interested in buying your business to neutralize the threat you pose to their profits. These strategic buyers are also looking for businesses with an EBITDA of 2.5million or more and can be found through an investment banker.
The Mid-Size Model
The tricky side of today’s market for mid-sized business owners is that their businesses are too large to attract the job seekers and too small to interest the investors and strategists. So where do you turn?
A boutique investment banker can help you find a buyer. These guys may be harder to find, but the process is the same—talk to your advisors and let them connect you with a reputable investment banker or business broker who works buying and selling mid-sized businesses. There are buyers looking to invest in established businesses that fall somewhere between large and small; a boutique investment banker will be connected to these buyers.
The bottom line is to talk to your advisors—your attorney, accountant or wealth manager. Selling your business is complicated and has huge ramifications, so skip the internet search and instead work with someone you have good reason to trust.
Speak with an expert about transitioning your business.