In today’s market, those buying businesses fall into three major categories: the job seeker, the investor and the strategist.
1. The Job Seeker
The first division of buyers is looking for a business as a source of income. They’ll buy a local business, run it and earn their income directly from it. These businesses tend to stay small, less than $250,000 in profit or EBITDA, and are bought and sold primarily through business brokers. (Brokers are to businesses what real estate agents are to houses.)
2. The Investor
More commonly referred to as a financial buyer, these are often private equity firms who buy businesses as an investment for the purpose of making money. They often raise capital from investors to buy a business, spend 2-5 years making it more lucrative then sell for a profit, usually to another private equity firm.
3. The Strategic Buyer
Like the investor, the strategic buyer is out to buy a business to make a profit. The difference is that the value comes from more than just the profitability of the business. It also comes from the strategic benefit of adding this business to the buyer’s existing organization. For example, if your company is competition the strategic buyer may purchase your business to negate your competitive advantage. Or if the strategist wants to break into a specific corner of the market or reach a certain group of customers, they can buy a business that’s already in that market or serving those customers.
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