What Buyers Look For In A Business: The Different Types Of Businesses That Are For Sale
Part of a business broker’s work is finding interested buyers. On our website, we have a form for prospective buyers to fill out if they’re interested in buying businesses. This form has a number of different fields, including:
The industry the business is in
The asking price (high/low range)
The geographic area the business serves
Whether or not the buyer is interested in franchises
And more
Buyers are like Goldilocks—they want to find the business that’s just right for their price point and expertise. As a seller, it’s important to understand what buyers are looking for—that can help you set your expectations (buyers can be very picky) and understand our marketing strategies.
With that in mind, here are some of the different factors that buyers look at when evaluating businesses. Keep in mind that these buyers have very little information at first—they’re looking at vague descriptions and price points. Here’s what a business listing should cover:
The Industry That the Business Is In
There are about a million different ways you can define the industry of a business. On our website, we opt for broad categories:
Manufacturing
Education
Construction
Retail
Transportation
Wholesale
Services
Technology
Leisure
Often, a business will fall into more than one category—that’s okay. Prospective buyers want to know what industry your business is in because:
It helps them understand whether their experience will apply to your business
They can start looking at market trends to understand if a given industry is doing well in the market
Knowing which industry a business is in is also an essential part of business valuation—industry multipliers can have a dramatic impact on the sale price of a business. Buyers will, of course, want to do their own research when evaluating whether or not the price of a business is reasonable, and industry multipliers help.
Want to learn more about how businesses are valued? Check out our blog—there’s a lot of useful information.
The Asking Price
This is fairly straightforward—the higher the asking price, the fewer prospective buyers there might be; not everyone has a cool $2.5 million to spend on buying a business.
Buyers also typically need to invest more time and energy in businesses with higher asking prices—this time and energy go toward both evaluating the business and, after purchase, running the business.
A higher asking price also typically requires a buyer to diversify the sources of their financing—they may need to bring on partners, get loans from several different banks, or ask for the seller to finance a greater portion of the sale.
The Geographic Area Served
There are some obvious, practical reasons a prospective buyer might want to know which areas you serve. Is your business located near them? A longer commute might be a disincentive. Do you serve an area that the business owner knows well?
Other reasons may be a bit less obvious. Imagine your business has some clients in the United States. A prospective buyer with experience in your industry may have recently sold their own business in the U.S. They might have a non-compete clause in the region. This would make purchasing your business impossible unless you were to sell off U.S. operations or otherwise discontinue them.
Is the Business a Franchise?
There are advantages and disadvantages to purchasing a franchise. New franchise owners will typically receive a lot of training and support. Brand recognition will often help drive success, and some buyers see franchises as more or less of a “sure thing”.
It’s not all sunshine and roses, though—purchasing a franchise can be more expensive, and various fees can reduce the profits that the new owner sees. In many cases, franchisors can be particularly needy—they exert a lot of control over what the new business owner can and cannot do and where they can and cannot expand.
Conclusion
As you can see, the type of business being sold has a profound influence on the type of buyer who will be interested. As a Vancouver business broker, Jason Brice specializes in businesses ranging from $250,000 to $2.5 million in valuation—what we in the business refer to, typically, as “Main Street businesses”. Interested in selling your business? Call Jason today!