You’ve spent years putting in the hard work to build a small business up from the ground, and now you’re ready to cash in on the value you’ve created and take a well-earned break. But how should you go about selling your business, and how can you find a buyer who will offer a fair price?
As Baby Boomer entrepreneurs start thinking about retirement, many are choosing to sell their companies to key employees or family members who already know how the business works. But this is not an option that is available to everyone, and those who are considering selling on the open market are faced with the challenge of finding a buyer and negotiating a good price directly.
Financial buyers are investors who look at potential acquisitions for the value they will create in the medium term. Typically, financial buyers are interested in acquiring companies they intend to extract value from and re-sell in a few years.
The most common type of financial buyers are private equity firms looking for businesses that have the potential to produce quick yields through the implementation of cost-cutting measures, streamlining, and increased profitability. Selling to financial buyers is often more straightforward because a financial buyer will mainly be focussed on the fundamental financial value your business represents.
Strategic buyers are looking for acquisitions that have good synergies with their own businesses. For example, they may want to acquire your businesses as a part of a vertical integration process, or in order to move into new regions or markets.
While strategic buyers can be a good choice for businesses that have a lot of market value, they also require a more involved process. Selling to this kind of buyer means being prepared for:
- A longer negotiation period
- Robust confidentiality protocols
- More rigorous due diligence
- A thorough investigation of financials, assets, and other aspects of the business
It is, of course, still possible to get a good deal from a strategic buyer, and in the long run selling to a strategic buyer can be a good way to ensure that your business has a long-term future and your employees are kept on.
Given the complexities involved in negotiating a deal with either a financial or a strategic buyer, most small business owners considering divestiture opt to work with a mergers and acquisitions expert to broker the sale.
Not only will a brokerage help you strategize the right approach to selling and provide an accurate market valuation, they can also advise you as to what kind of buyer is likely to offer the best deal, and target potential individuals, businesses, and private equity groups confidentially. Perhaps most importantly, they play an active role in negotiations, ensuring that you have an aggressive advocate at the table.
Whether you are looking for a buyer who will keep the business intact and continue providing a high level of service or simply want a good ROI, a business brokerage is your best bet for securing the perfect deal.