What to do When Approached by a Buyer: A Seller’s Guide
Define Your Buyer
You have sacrificed so much for your business to grow to where it is now, and now you are being approached by individuals who are looking to buy it.
How do you identify the different types of buyers out there and more importantly, how do you pick the “right” person to buy your business? We feel that in order to find the “right” buyer that suits you best, we will lay out some of the different kinds of buyers that are searching for a deal.
At a minimum, there are four different kinds of buyers to look out for when you start the process to sell your business:
A buyer that is interested in buying your business, but can’t afford it.
This is initially an odd person to show interest in your business. Since these buyers are ultimately not going to make an offer, why are they interested in your business? They are showing interest in your company for a couple of different reasons. They might be looking to learn more about the industry, and they could actually have a genuine interest in your company.
The fact that these businesses won’t make an offer alludes to the possibility they are showing interest in your company for alternative motives, good or bad. You need to keep this in mind and do the same. These interactions provide great “training reps” for you as the seller to get comfortable sharing your business with a potential buyer.
As you get more comfortable sharing your business to buyers, you will be able to gain more knowledge about what kinds of buyers fit you best and get an idea of what kind of experience you are looking for in a future deal. You will be able to answer questions like What kind of relationship do I want with the buyer? What role, if any, do I want to keep within my business after it is sold?
Keep in mind, although these interactions will improve your confidence and ability to share your business with future buyers, it is best to adjust your attention to meaningful buyers accordingly. In the end, they cannot afford it and they will not end up making an offer.
A buyer that can buy ten of your company, but has no interest in you personally.
Hey, sometimes it is all just strictly business if that’s what you are looking for. If you can identify one of these buyers, be sure that you are able to clearly identify if these interactions are ones that you want to pursue further, or if would you rather hold out for the “right” buyer. If you decide on this type of transaction, you can expect a certain type of process. The first thing you can expect is that there will be no personal connection or relationship developed throughout the process.
You also expect that the buyer will not take no interest in you personally which can lead to an unsupportive relationship. On the other hand, if you hold out for the “right” buyer, you will develop a supportive relationship with a buyer who cares and believes in your mission statement. This is the tradeoff in deciding on whether to pick two types of buyers, one who is interested in you and one who is not interested in you.
This distinction between a wealthy, uninterested buyer and the “right” buyer leads to an important implication to how the process will most likely play out with a wealthy buyer. The buyer will most likely want you out of the picture sooner rather than later. This is the important expectation of choosing an uninterested buyer to sell your business to.
If you expect to stay within the picture of your business or want to have a strong, supportive relationship with the buyer, this option might not be for you.
A buyer that only wants insider information and won’t buy at all.
These buyers are the type of buyers that you should avoid because you have nothing to gain out of the interaction. The only reason they are showing interest in your company is to gain valuable information. There is no chance of selling your business to this buyer. In the example of a buyer who is interested in your business but cannot afford it, we talked about the option of using this interaction as practice for your presentation skills.
This can be beneficial for identifying the buyer that best suits you and understanding what kind of transition process you are looking for. When you interact with a buyer who can afford your business but only wants to take information about your business and industry, practicing presenting your business is not useful anymore.
The benefit of improving your presentation skills is offset by the detriment of giving away your precious information while practicing your presentations. Interacting with this type of buyer results in no sale or personal gain which ultimately is a waste of your time. Beware of these potential buyers and usually, you can spot these folks before divulging too much of your hard-earned time or information.
A great way to know if you are dealing with this type of buyer is to identify early. This can be done by doing thorough research on who your buyer is and their history of buying.
Finally, the buyer you want!
They have the qualities that any seller looks for in a potential buyer. They have the financial potential to close on the right deal, are genuinely interested, and are willing to create a deal that works for all parties involved.
This is where we come in. Tsetserra Growth Partners are committed to growing the value of your business while respecting its legacy for a deal that is driven without any outside financial pressures or time constraints. We care about creating a supportive partnership with the business owner by crafting a personalized and unique transition plan that fits the needs of the owner. This way of doing things is different from traditional private equity firms that are not interested in you and are looking to sell your business short term.
Creating a supportive relationship goes hand in hand with our individual approach to transitioning a business to its next chapter, to operate and add value to the business long-term. Owners have sold to us in the past because they are looking to find someone who is able to not only maintain their business but grow it for years to come.
We take pride in being a partner that is knowledgeable, reliable, and someone that a business owner can count on acting in the best interest of the business from a legacy and value standpoint.
To recap, we went over 4 types of buyers in this article, A buyer that is interested in buying your business, but can’t afford it, A buyer that can buy ten of your company, but has no interest in you personally. A “buyer” that only wants insider information and won’t buy at all, and finally the “right” buyer. Selling your business to the “right” buyer can be hard, there are different kinds of buyers out there who might be interested in agendas that are not buying your business.
Learn more about the process of selling your business here.