After working hard to grow your business into a successful company, most likely you’ll want to sell it and reap the benefits of all those years of hard work. There are many questions involved with selling a business, but the most important is: How do you find qualified buyers?
Some people say the quantity of buyers that are interested in buying your business is most important. Others say it’s the quality of buyers, regardless of quantity. But the correct answer is…both are very important. Here’s why…
If you have 50 buyers interested in your business, then you have plenty of quantity. But if you are selling a $1,000,000 manufacturing business and these buyers can only afford a business that costs less than $300,000, or if they all prefer a service business, then this “quantity” of buyers is a waste of time. You will spend hours talking to unqualified buyers about your business when they have no interest in actually buying it.
Conversely, say you only have 2 buyers interested in your business and they are looking to spend at least $1,000,000 on a manufacturing business. You have good buyer “quality” but not enough quantity.
On average, you need at least 10 or more qualified buyers to look at your business before you can reasonably expect to sell it. And the more qualified buyers you have considering your business, the higher the sales price will be.
In a nutshell, the more qualified buyers you have looking at your business, 1) the faster you will sell your business and 2) the more money you will make on the sale.
But how do you get both quantity and quality of buyers interested in your company?
The answer depends upon the amount which you expect to sell your company. If the amount is less than $2 million, you are generally looking to sell to an individual. At an amount over $2 million, you are typically seeking a corporate buyer.
Depending on the amount and thus the buyer type, there are different ways to find buyers as follows.
Selling For Under $2 Million
For sub-$2 million sales, the two best methods of finding a buyer are as follows.
1. Business Brokers
Business brokers are typically very professional and knowledgeable in the art of buying and selling a business. Plus they are skilled at helping sellers sell their business. They will prepare your business for sale and handle all discussions with buyers on your behalf.
In addition, brokers will help generate interest in your business from buyers through their relationships with other brokers, as well as listing your business for sale on their website.
However, to get maximum quality and quantity of buyers interested in your business it is best to complement a broker’s services with additional advertising efforts. You can do this either in conjunction with the broker’s efforts, or on your own.
2. Online Marketplaces
Currently the most effective method of getting both the highest quantity and quality of buyers interested in your business is by advertising on an online business-for-sale marketplace. These marketplaces are searched by hundreds of thousands of buyers each month, and can generate a staggering amount of interest in your business.
There are many online marketplaces to choose from, such as BizBuySell.com and BizSale.com-but they are far from equal.
Some have inadequate search functions, which mean your quality of buyers will decrease. The better the search functions the site offers, the more precisely buyers can search for what they want. And when a buyer finds your business, you know they are highly qualified.
Other business-for-sale marketplaces are just interested in collecting listing fees from you, regardless of whether or not they help you find a buyer. These sites charge a monthly listing fee that is not tied to performance of any kind. As a result, they may or may not bring you any qualified buyers, and they really don’t have any incentive to do so.
Different websites have more or less traffic than others, and I would generally go with whichever can boast of the most visitors. However, if there’s no cost to add your listing on a site, it doesn’t take more than a few minutes to copy and paste the listing details from one site to another.
The most effective business-for-sale marketplaces put their money where their mouth is and only charge sellers on a pay-for-performance basis. With these sites, you list your business for sale and it appears in buyers’ search results when they search for a business like yours. But you are only charged a small fee if the buyer actually clicks on your listing and views its details. And you can set your own budget to determine the quantity of buyers you want.
Performance-based marketplaces are very efficient and highly effective because you get exposure to the maximum number of highest quality buyers, but you don’t pay if you don’t have any qualified buyers view your listing.
Selling For More Than $2 Million
If you seek to sell your business for more than $2 million, as stated above, most likely you are seeking a corporate buyer — who has the ability to pay big dollars for your company.
When seeking such a buyer, your best bet is to use the services of a qualified investment banker. While the banker will charge you fixed cash and success fees (a percentage of the amount for which your company is sold), most are well worth the cost.
Why? Because they can help you sell for a higher price (making their fees insignificant) and they can help you negotiate the best terms of the sale (e.g., the timing of your payout, etc.).
Good investment bankers will know how to position your company for sale and get as many qualified buyers as possible interested, and get them to bid against each other so you can get the best deal terms and price.
To build a sellable company, whether or not you plan to sell it for less or more than $2 million, you will need to get as many qualified buyers as possible to ensure the highest price. In the meantime, focus on building a company that tons of buyers will WANT to buy. Generally, that means a company with strong profit margins, recurring customer revenue, a diversified customer portfolio (versus having few customers comprising the majority of sales), and systems and personnel that allow the business to run without you.
When you build such a business, finding lots of qualified buyers will be much easier.
The Ultimate Path to Wealth
as an Entrepreneur
What’s the ultimate path to wealth as an entrepreneur?
Build your company and then sell it for millions to the highest bidder.
Don’t build your business the wrong way.