What Are Buyers Looking For in a Business?

What Are Buyers Looking For in a Business?

It is not outside the realm of possibility that a buyer approaches Transworld having access to cash and an interest in buying a business, but without a particular business in mind. This type of buyer is typically someone who has previously owned a business and were successful in developing the business and they want to replicate this process with a new venture. There are also buyers who are looking for a more specific type of business. These buyers may want to work for themselves, add to their current business portfolio, diversify or even fulfill a long-held dream.

In general, buyers will be looking for a few attractive qualities that signal to them there is a baseline of success associated with the business prior to purchase. These qualities will become the deciding factors in choosing a business to invest in. Following is a list of qualities to consider that will have an effect on the attraction of buyers to your business.

  • Industry/Market Stability: Does the business offer a baseline of stability? Most industries/markets experience cyclical periods of growth and recession, but those businesses that are proven to be more stable often times attract more buyers. Ultimately, industry/market stability depends on supply and demand.
  • Organizational Structure: The way a business is structured is a major factor for buyers. In general terms, business structure is the framework on which the business is run. This can include the reporting structure and supervision of employees, task allocation, and operations coordination. A key aspect of the organizational structure is the level of owner involvement with customer facing activities such as sales, customer service or customer retention. Businesses with a high level of owner involvement can make the transition to a buyer and success thereafter difficult.
  • Owner Engagement: Along the same lines as Organizational Structure is Owner Engagement. Can the business operate well as owner absentee or does it require a full-time commitment from the buyer? The varying level of engagement required by the buyer can get them excited about a business or may turn them off. There are buyers who want to physically manage the business 40-50 hours per week and some that want the business to run itself.
  • Culture: Many buyers prefer their prospective business to reflect a culture and beliefs similar to their own. Buyers may even look to see themselves in the current owner. A buyer that can identify with the owner can more easily visualize taking over that business. This cultural continuity also makes for an easier transition for current employees and vendors, adding to the attraction.
  • Reputation: Buyers don't like uncertainty. A business reflecting a good, strong reputation within an industry or community, is very attractive to a buyer. It sets the buyer up for success from the start knowing that customers have come to depend on a business and a certain standard.
  • Niche Business: Niche businesses offer an ability to lead the market in their segment, have limited competition and can have increasing demand for their products or services over time. These businesses often attract very specific buyers.
  • Franchise Business: A franchise offers a proven business model with a track record of positive performance, a recognized name and branding, marketing assistance and a structured business platform. This type of business can be very attractive to buyers who are averse to uncertainty or may be new to the entrepreneurship game.
  • Established Revenue: A business with established revenue has traction in the marketplace and an ability to continue its growth. It shows some level of security that a buyer can count on.

When you are ready to list your business for sale, remember that it is important to understand how the buyer will view your business as an outsider. Bringing forward the positive qualities of your business, such as successfully conducting business in the same location for 15 years will show buyers this is a business to inquire about. In addition to highlighting a business's positive qualities, differentiating your business from others for sale is another great way to attract buyers. Maybe your business uses a technology that similar businesses in your industry do not - that is definitely a quality of the note.

Transworld realizes that the many qualities that may attract buyers to a business is a lot of information to digest, but we are here to help! The brokers at Transworld will help you, the seller, best prepare your business for sale and will be able to share with you the techniques needed to attract quality buyers. When you are ready to begin the process, schedule a free consultation with one of our well-informed brokers today.

For more information on buying and selling a business in Colorado visit www.tworlddenver.com or to speak with a broker schedule a consultation today!

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Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master?s Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.