Once you decide it’s time to exit your business, there are three preliminary steps for you to prepare your business for a sale:
Set goals (when, how much you hope to sell it for, ideal buyer, your on-going role);
Evaluate the business’ readiness to sell, including obtaining a formal valuation;
Make improvements to maximize the business’ value.
After you’ve gone through these phases, the next stage is finding a buyer. Here are nine ways to find potential buyers for your business.
Look for an Internal Person
To start off, determine if someone who works in your business right now might be the right buyer. Selling to an internal buyer provides continuity to customers or clients. Also, an internal person is familiar with operations, procedures, vendors, and the team. However, there are definite challenges to this approach too.
For example, is the successor capable of taking over for you? Does she have the means to buy your business? If not, you’re likely to use seller financing to allow them to buy the business and this approach brings added risk. For example, if the successor operates the business poorly, it may lose value or even fail. You could end up back in the business.
ESOP Option
As an alternative to selling your business to one or two people on your team, if your business is big enough, an Employee Stock Option Plan (ESOP) buyout is also a possibility. With an ESOP, all the employees have the opportunity to buy the business. Generally, your annual business revenue needs to be over $10 million for an ESOP to work.
Search within Your Network
If no one from inside your company could be a potential buyer, then you will turn outside. Start with your network. You can tap into your personal and professional network and see if they know someone who might be interested in purchasing your business. Friends, family, colleagues, and industry contacts might know someone interested in buying a business like yours. Make sure to ask your CPA, banker, and business attorney if they know someone.
Market to Competitors
You can also market your business to direct competitors. Competitors may be interested in acquiring your business to expand their market share, gain new customers, or acquire unique assets.
Target Strategic Buyers
You should also target strategic buyers. Think of companies that provide services or products to your customers just before or just after the customer uses your services or buys your products. These companies could benefit from acquiring your business. They may be looking to expand into your region, diversify their offerings, or integrate your technology.
For example, if you own a coaching business in the healthcare niche, is there an executive recruiting business that might want to get into the coaching business?
Attend Industry Events
Participate in trade shows, conferences, and networking events in your industry. These events are suitable places to meet potential buyers. Some attendees have purchased businesses and may be interested in buying yours.
Engage a Business Broker
On the one hand, business brokers have access to a wide pool of potential buyers and can match you with individuals or companies looking for opportunities in your industry. On the other hand, business brokers are not ideal partners for you. I discussed the pros and cons of business brokers in an earlier article you can find here.
Reach Out to Private Equity Firms
This may be a long shot for most of us (how many private equity firms do you know?). But it’s worth a try because private equity firms are interested in acquiring small businesses with growth potential. Research firms that focus on your industry or region and ask your CPA and banker if they have contacts within the private equity world.
Use Online Marketplaces
Be careful if you use an online marketplace to protect your confidentiality. However, you could list your business on online marketplaces like BizBuySell, BusinessBroker.net, or Flippa, where potential buyers actively search for businesses to purchase.
When it’s time to sell your small business, finding the right buyer is crucial for ensuring a successful transition. In this article, I listed strategies to help you identify potential buyers, from leveraging your personal network to using online marketplaces and engaging a business broker. Use these ideas to guide you through the process and help you connect with buyers who are genuinely interested in your business.
Let’s Have a Conversation:
Have you discovered any other successful ways to find potential buyers? I’d love to hear from you. Look around in your industry, see what other business owners have done to sell their businesses, and share your insights with me in the comments section below.