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Considerations in Selling Your Business- Part 5: Identifying Potential Buyers

by Patrick B. Mathis, Shareholder at Mathis, Marifian and Richter, Ltd.

Identifying Potential Buyers

After you've decided to sell your business, how do you go about finding a buyer?

iStock 87321445 LARGEIn some cases, sellers may rely upon a business broker or investmetn broker to find, solicit and bring potential buyers to the seller. In those cases, the role of certified business brokers or investment bankers is to identify potential buyers, create a marketing package for the business that is appropriate to the type of sale and ultimately bring the buyer to the table.

In other cases, sellers themselves may be best suited to identify potential buyers for the business. For example, an owner may be aware of the merger and acquisition activity within the industry by one or more national or international companies and recognize that those players are the likeliest buyers and that this might be the most opportune time for the sale of his business. In other cases, a key supplier or customer may best fit the business. Competitors, either local or on a regional or national level, may offer the optimal pricing. These buyers are frequently described as “strategic buyers” because they have the opportunity to increase the profitability of the seller’s business by consolidating operations, reducing operating expenses, capturing more of the market, or integrating product lines. Frequently these strategic buyers may offer the highest price because of the anticipated higher investment return as a result of these cost savings, increased revenues, etc.

Finally, in some cases investor buyers such as venture capital firms may be the best fit for a seller’s business as they have readily available funds and seek to expand their business holdings through the acquisition of operating companies. In those cases, these buyers may simply wish to retain the business as an ongoing operation or consolidate it with other similar business holdings.

Developing a list of potential buyers, or utilizing the services of business brokers, attorneys or other advisors to develop such a list, is a critical step in the process of selling your business.

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