When your shareholders have decided it is the right time to set your BusinessIt is very simple to say, “great, let's sell it to the buyer with the highest rating.”

But that would be a mistake. There are several other factors that go to find the right “buyer” for your business and your specific situation. This article will help you think through those different points of consideration and provide some Warnings about things You should look to avoid possible possible obstacles when it comes to choosing the right buyer for your business.

Different types of buyers in a The process of normal sale

When companies are put on sale, this is often done with a business broker who is trading your company for many future buyers at the same time. Let us say that, in a normal process, they can reach up to 200 target buyers, take 20 of them to be included in some kind of dialogue or proper care, and receive 5 of them to present a letter of purpose to buy your business.

The question of this post is: Which of the five buyers is the one to choose? Alert Spoiler: It may not be one at the highest price.

Most buyers can be classified into one of the three categories: (i) strategic buyers, which are companies seeking to enter your industry or increase their current market share in your space; (ii) financial buyers who are often private capital firms or family offices seeking to buy businesses that flow as an investment strategy; and (iii) individual or entrepreneurs who seek a business for them to own and operate on their own (these may be individual or sponsors of funds supported by private capital funds by creating new executive roles for themselves) .

Let's talk about the typical advantages and disadvantages of these three different types of buyers.

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Strategic buyer

lead: Strategic buyers are often more reliable to get to close. They are talking to you because they see something in your business that can help them in their business. Because of this, they are often more willing to pay the highest ratings. They are often hand -richwhich means that many do not need external loan to make an agreement, depending on the size of the agreement. They do not necessarily need your management team if they have other leaders able to enter and run the business.

disadvantages: Strategic buyers are often the slowest movement and have the longest time to close, as there are many different decision makers involved. So if speed is important to you, think twice to go down this road, as the process of proper care and designing documents can be more severe.

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The financial buyers

lead: Financial buyers can move very quickly, as they usually sit in a large pile of money they are looking to invest.

disadvantages: They will often want to increase bank debt by up to 50% of the purchase price to better spread their capital investment potential in other companies. And banks like to invest in company over 3 mm in EBITDA, which may not be you.

They will want to support leaders, compared to the business itself, so make sure you have a management team plan for them, which can include employment and training of your pre -sales replacement. They tend to be the most aggressive in negotiating the best possible price for themselves in order to maximize ROI for their investors.

Individual buyer

lead: These tend to be the least sophisticated buyers and may require the slightest or least “hoops for you to pass” to reach the closing.

disadvantages: They often seek bank funding for a large part of the transaction (up to 90% with SBA -backed loans), so the process can be slowed by them with need Provide the necessary capital. Since those bank loans often require personal guarantee from the buyer, they are often the most nervous about “making an error” and can easily speak out of a transaction if they do not want to take additional personal risks.

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Other topics to consider when choosing a buyer

In addition to the type of buyer, you need to evaluate these additional considerations to determine whether they are the right buyer for your business or not.

• Their reputation. If you want to protect your heritage, you do not want to sell your business to a buyer who will damage the company's reputation in the future.
• Their plan for your business. If you take care of how the business will be executed after selling, you do not want to sell anyone who does not share that vision.
• Their plan for your employee team. If you take care of the right handling of your staff after sale, you don't want to sell to someone who will rest your team.
• Their chances to close. Selling a buyer with a 75% chance of closing is much better than selling someone with a 25% chance of closing, even if that means a lower price.
• Their speed for closing. Selling to an experienced buyer who knows how to go through the process quickly, preferably sells an inexperienced buyer who may have the process withdrawal for months and still not reach the finish line.
• Their personal adaptation to your culture. Make sure there will be no personality or other issues with the buyer in terms of how they will join your current culture and team.
• How it is financed. An offer with all money is much better than an offer that requires any seller's note, won or third -party bank financing. Duan!
• How safe is their funding? If they require the bank's external debt or net capital investors to finance the transaction, have those commitments already provided, or is there a risk that they will lose their financing? Even engaged funding can fall, so be careful here.
• Market conditions. If the economy or financial markets are perceived to be on an unstable basis, buyers, banks and net capital investors will be nervous, which will damage your chances of selling business. Find buyers with a long -term vision that are comfortable in all market conditions.

As you can see, there are many more things to consider than Maximizing evaluation When choosing the right buyer for your business. Do not focus so much on getting the highest sales price that you potentially “overthrow your apple basket” without fully taking into account all the above issues. Good luck!