How to Find A Buyer for Your Business
Now may be the time to sell your business. Both strategic and financial buyers are actively seeking acquisition targets and pricing is trending upward. If you have made a decision to sell your business, engaged an attorney, accountant and other experienced advisers to help prepare the business for sale, you may ask, “How do I find a buyer for my business?”
Often the logical potential buyers are obvious from your understanding of the industry or may be uncovered by conducting research. The usual suspects include competitors, suppliers, customers, investors and others who have a proven interest in the industry or who could unlock potential synergies from an acquisition.
A threshold issue is whether to engage an intermediary such as a business broker or investment banker. Either will ordinarily ask for a contract with a 180 day or more exclusive right to sell the business. Business brokers typically charge a fee to the Seller equal to a percentage of the purchase price. Ten percent is typical. Investment bankers usually charge lower percentage fees since the transactions they work on are usually larger.
In exchange, the intermediary often prepares a presentation package for prospective buyers. An experienced intermediary professionally markets the business and can offer assistance in valuing and pricing the business, setting the terms of sale and evaluating offers. The result can be a considerable saving of the business owner's time and effort.
Alternatives to brokerage do exist, however, and may be explored before or, in certain cases, concurrently with, engaging an intermediary. Print advertising can be a viable way of advertising smaller, privately held, businesses for sale. The most popular ads are placed on Sunday in larger local newspapers or business publications such as the Wall Street Journal.
Business opportunity ads describe the business in several short phrases, keeping its identity secret and list a phone number (other than the business phone number) or a post office box for reply. Ads are worded to demonstrate the best qualities of the business and may include a qualifying statement about the kind of cash investment required.
Similarly, many sites exist on the internet that attempt to link buyers and sellers of businesses. These can be effectively used to find a buyer for your business.
Confidential discussions with key suppliers, customers and other industry or trade sources can often yield viable leads. Most industries also have trade associations and publications which can be used to communicate that a business may be available for sale. If a Seller believes that a buyer is most likely to come from the same industry, the trade association's publications department could be contacted to see if classified advertising is permitted.
Existing employees of the business should not be overlooked as potential buyers, particularly if your business is large enough to make the use of an ESOP feasible. Existing key employees know your business from the inside, and may already have a personal stake in its survival. Insiders may be willing to pay more for your company than an outside financial buyer, because their inside knowledge lowers their risk.
In any event, it is important to consider and have a plan for dealing with the rumor mill and the potential effects on your business should it become generally known that you are interested in selling. The more people who are aware of your plans, the harder it is to keep your plans secret. For this reason alone, many business owners prefer to deal with business brokers and investment bankers because of the perception that information may be more tightly controlled in so doing.
