Buyer Aware: Where do I find a buyer for my business?
Before reading this article, we suggest you read our article, “Timing is Everything: When Should I Consider Selling My Business?”
When we meet with business owners regarding the sale of their business, a question we often hear is, “I want to sell my business, but how exactly do I go about finding a buyer?” This is a complex question that actually revolves more around finding the right buyer and not just any buyer.
The right buyer is someone who will see the maximum value in your company and make the entire sale process as seamless as possible.
Typically, buyers are derived from three areas: Internal staff, industry peers or open market.
Internal Staff
The best place to start looking for a buyer is with your internal staff or family circle. Succession planning, at its core, revolves around grooming and transitioning the next generation to continue the business. Staff know the business and industry, they understand the operations, most likely have a personal relationship with customers and suppliers, and they can typically provide the best overall opportunity for a smooth transition. However, they typically do not have the financial means to pay you out all at once. A standard sale transaction with staff will usually involve some vendor financing or corporate financing to help structure the deal. You might get 50% up front and the remaining 50% over a 3-5 year period. This might be appealing if you want a gradual transition. However, providing the financing and taking a risk on the earnings in the next few years to fund your retirement might not be the best strategy for you.
Industry Peers
A lot of businesses sell directly to other owners in their industry or companies who have similar business synergies and are looking to use your turnkey company as an easy opportunity to grow their operations. Keeping your ear to the ground and having open discussions with people in your industry can lead to opportunities to find a buyer. Staying connected through industry association meetings and other peer business groups can always provide leads about where other companies in your industry are looking for opportunity. One downside to this method is confidentiality. Many business owners are sensitive to letting other companies know they are for sale or subjecting themselves to additional scrutiny and competition. It might be a chance for your competition to solicit key staff members as a chance to get out before the sale. In turn, losing key staff could result in a reduced selling price. Ultimately, going this route needs to be done with confidentiality for the transition to have the best outcome possible.
Open Market
Across North America there are a number of websites and publications that openly advertise businesses for sale. You can be discreet in how you present the information on these sites to ensure confidentiality. Benefits of taking your business to the open market and beyond internal staff and industry peers is to attract a more diverse buyer pool. As noted above, maximizing the value of your business is all about finding the right buyer; presenting your business for sale to the open market provides the best opportunity to find the right buyer. The buyer could be looking to expand their existing business into your city or region. They could be a small business owner relocating and looking for a business to buy or they could even be an international buyer looking for investment opportunities.
Ultimately, when it comes to finding the right buyer for your business, the key is to be in a position to be ready to sell the business. Once you are ready, the opportunities will begin to present themselves. Typically, you will always start internally and expand your search outwards. It is rare for a business to sell on the first discussions with the first potential buyer, but you will learn a lot about who the potential buyer could be and what positives and negatives a prospective outside buyer sees in your business. Even if someone does not end up buying your business, the information you can and will take from the process will be invaluable as you move forward.
Jared Burwell is the author of this article. He is the founder and director of Viros Group, a capital investment and financial management firm focused on business growth and succession planning. He has spent the last 20 years in public accounting with a primary focus on providing advisory services and financial oversight to a wide sector of small and medium-sized owner managed businesses.
