Three Types of Buyers Out There

Tips for Choosing a Business Broker

Understanding the three main categories of buyers – Individual, Strategic, and Financial – when selling a business can give you a better insight into their decision-making process and what is important to them. This, in turn, can help you determine what’s best for you.

Individual buyers want to buy and manage their own business, usually leaving corporate life to become entrepreneurs. They value a business that aligns with their interests and skills in sales, marketing, leadership, and people. However, challenges may include limited industry experience, few financing options, and a learning curve for the M&A process.

Strategic buyers are successful entrepreneurs looking to expand within the same industry sector, typically with strong financial backing and industry experience. Benefits include a wider range of financing options and the ability to bring the company to higher success and profitability. Challenges include a loss of company identity and potential changes in culture due to a merger with the buyer’s existing business.

Financial buyers are groups of investors seeking to buy, invest, and resell a profitable business. They focus on maximizing returns for their investors and may have a 5-9 year ownership span. Benefits include minimal company culture change, a faster closing process, and easier financing due to their high net worth. However, challenges include the company changing hands, potential conflict with the seller’s exit plans, and usually, a minimum profitability threshold of $1 million+ in adjusted EBITDA.