Who is the Buyer?

Buyers buy businesses for many of the same reasons that sellers sell businesses. It is important that the buyer is as serious as the seller when it comes time to purchase a business. If the buyer is not serious, the sale will never close. Here are just a few of the reasons that buyers buy businesses:

Desire for more control over their lives
Desire to do his or her own thing

Job dissatisfaction
Laid-off, fired, being transferred (or about to be any of these)
Early retirement (forced or not)

Buyer Profile

Here is the profile of the average buyer. More than likely they are looking to replace a lost job or looking to get out of an uncomfortable situation. The chances are he is a male (however, more and more women are going into business for themselves). Almost 50 percent will have less than $150,000 in which to invest in the purchase of a business. In many cases the funds will come from personal savings followed by financial assistance from family members. It will be a first time purchase, and the buyer will most likely buy a business he or she had never considered until being introduced to it.

Their primary reason for going into business is to get out of their present situation, be it unemployment or job dissatisfaction. The prospective buyer wants to do their own thing, be in charge of their own destiny, and they don't want to work for anyone. Money is important, but it's not at the top of the list; in fact, money is probably fourth or fifth on the list. In order to pursue the dream of owning one's own business, the buyer must be able to make the "leap of faith" necessary to assume the risk of purchasing and operating their own business.

Buyers who want to go into business strictly for the money usually are not realistic buyers for small businesses. Keep in mind the following traits of a willing buyer:

The desire to buy a business

The need and urgency to buy a business

The financial resources

The ability to make his or her own decisions

Reasonable expectations of what business ownership can do for him or her

What Do Buyers Want To Know

This may be a bit premature since you may not have decided to sell, but it may help in your decision making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business. Here are some questions that you might be asked - and, should be prepared to answer.

Prospective buyers eventually want to review your financial figures. A Balance Sheet is not normally necessary unless the sale price of your business exceeds the $1 million threshold. Buyers want to see income and expenses. They want to know if they can make the payments on the business (more on this later) and still make a living. Let's face it, if your business is not making a living wage for someone, it probably can't be sold.

The buyer will certainly ask:

How much money is required to buy the business?

What is the annual increase in sales?

How much is the inventory?

What is the debt?

Will the seller train and stay on for awhile?

What makes the business different/special/unique?

What further defines the product or service?

Bid work?

Repeat business?

What can be done to grow the business?

What can the buyer do to add value?

What is the profit picture in bad times as well as good?