Selling a Business – Who is Your Buyer?
Over the past few days I have done two posts interviewing John Leonetti about his book Exiting Your Business, Protecting Your Wealth. I have been talking with several young professionals who are looking for businesses to buy or who are buying businesses from Baby Boomers, so today I wanted to give you some insight into these young people. I figure the more information you have the better.
Who Wants to Buy Your Business? Your prospective buyer might be anyone, but I would guess they have several characteristics:
They are young – probably under 35
They are male, although more and more I talk to women who are buying businesses.
Inexperienced Buyers. The person buying your business has probably never bought anything more complicated than a car. This means they are naive about the complicated process of buying a business.
They are in a hurry. Because they haven’t done this before, they underestimate both the complexity and the time it takes to go through the process.
They don’t have money. This works against them in a couple of ways:
- They don’t want to pay a lot of money to an attorney or a CPA. This puts them in a difficult position for evaluating your business, since they don’t know much about evaluating financials or legal documents.
- They don’t have collateral and they may not be able to get a bank loan. Which means “seller financing.” That’s you. Be prepared for the question and how you might want to structure a seller-financed deal.
Short on Negotiating Skills. Because they are inexperienced, these people are also short on negotiating experience. They don’t know how to negotiate price or to get the terms they want. They may not even know what terms they do want. You will need to be patient with them.
They are Needy. Inexperience, lack of money, and being in a hurry all contribute to your potential buyer’s most striking characteristic. He’s needy. He is sure your business is the only one on the planet. He may not even take a good look at your financials because he’s in such a hurry to get this “last chance” deal.
I hope you aren’t thinking of taking advantage of these poor people. Maybe you’re wondering why you want to sell to someone who has no money, no experience, and no negotiating skills. But if you are serious about selling your business, you will run into this type of buyer. I guarantee it.
If you have sold or are selling your business, I would be interested in your experience and your thoughts.
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