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A Creative Funding Technique For Your Business

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If you are ever in a position to sell your company, you'll learn that there are two general types of buyers.

There's an individual buyer, or a person who wants to buy your business so they can run it themselves.

And there's a corporate buyer, or a company who wants to buy your business and integrate it into their own.

For the most part, there's a financial cut-off between the groups. That is, if you are selling a business for less than $2 million, generally you are selling it to an individual buyer. And for businesses above $2 million, you are generally selling to a corporate buyer.

Now, when selling a sub $2 million business, you often use a business broker (versus using an investment banker to sell a larger business). And most business brokers among other things, will list your business for sale on several websites.

One of the largest of these websites, in terms of number of visitors, is BizBuySell.com.

Occasionally, I visit BizBuySell.com myself for educational purposes. I like to see the types of businesses that are for sale, how they are positioning themselves, and what prices they are asking.

And the last time I visited BizBuySell.com, I asked myself an interesting question:

Who primarily visits this site?

And the answer I came up with was 1) business brokers, 2) business owners who are selling their companies, and 3) entrepreneurs looking to buy businesses.

Now, it was this latter group, entrepreneurs looking to buy businesses, which I found most interesting.

Because, what must these entrepreneurs have if they are looking to purchase a business?

Money, or access to money.

Now why this is so important is that there are tons of entrepreneurs with businesses or business ideas seeking funding for their businesses. And these other entrepreneurs (who don't have businesses or business ideas) clearly have their own, or have access to funding.

Which led me to a potentially creative technique for raising funding.

1. List your company (even if it's just a startup or concept) on a site like BizBuySell.com

2. When buyers contact you, explain to them that your preference is not to sell your business or concept to them, but rather to partner with them. That is, have them buy-into your business. Specifically, if they invest $Y, they will get X% ownership in your business.

So, the concept here is simple: find someone who has money and is looking for a business opportunity, and have your company be that opportunity.

Now the question is whether this strategy is ethical or not. Mainly the fact that you are listing a company for sale that isn't really for sale in order to meet potential investors.

I think each of you have to answer that question for yourselves.

On one hand, if you legitimately would consider someone buying your business in its current state, then this strategy is clearly legitimate.

However, if you have no interest in selling, it becomes questionable. But perhaps, in your company listing, you more explicitly state that you are more interested in selling a portion of your business, and not the whole business to a buyer. Then, it seems more legitimate.

Note that I have not discussed this idea with the owners of BizBuySell.com or similar sites. But from their terms of service, it seems that such a strategy is acceptable to them.

A similar and clearly 100% legitimate strategy would be to contact local business brokers and see if they know of any potential buyers who would consider partial ownership (i.e., investing in your company) instead of full ownership.

Finally, one of the key points of this article was not to tell you about this one strategy for your consideration. But rather to let you know that there are tons of creative and alternative ways to fund your company beyond the "usual suspects" of angel investors, venture capitalists and banks.


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