Posted in Buyer Articles
Business owners seldom get to do a thorough analysis of all potential buyers of their companies, but the truth is that there are simple tools allowing sellers to scrape the surface of buyers and categorise them efficiently. This can later help with aligning expectations and foreseeing potential problems. Let’s take a look at six most frequent categories of business buyers.
When it comes to pricing businesses, there are a plethora of factors to consider and assess, some of which are more important than others. It is quite likely that the business that is trying to sell out could improve in a certain area and increase its asking price significantly. For example, a company X will sell for 50M THB as is or some changes can be made and the same company can be sold for 75M THB. Below is a list of potential company weaknesses companies can use to assess their vulnerability.
There is a story about Ray Kroc, the founder of McDonalds, who first observed the hamburger restaurant of the McDonald brothers for a few days before stepping in and making an offer. As we know today, the observation was well worth the time as McDonalds is currently one of the world’s most valuable brands and a very profitable worldwide business.
It may come to you as a surprise that many would-be business buyers don’t actually end up buying the business. In as many as about 14 out of 15 cases, the uncertainty resulting from facing a big and important decision weighed down on buyers and they ultimately changed their heart. For this reason, it is important for sellers to feel into the situation of a buyer, especially if they built their businesses from scratch.
When assessing a business to buy, a buyer usually employs a number of professionals to help them with activities, such as checking the numbers (accountants) or looking into legal issues (attorney) to name a few. Just as a buyer is scratching beneath the surface to make sure they are no hidden surprises, a seller may be equally proactive by predicting what the interested buyer would likely want to look into.
It is not uncommon for the buyer and seller to reach an initial agreement on the sale of the business, only to have it fall apart shortly after. The good news is that, as with everything else, there are certain patterns that can be observed and once they are understood by both parties, many deal-breaking problems can be easily avoided. Below are listed the most common factors negatively affecting the sale of a business.
Buyers can be categorised into one of the following groups although some buyers can fit into more than one. The groups are: The Individual Buyer – This is typically an individual with substantial financial resources, and with the type of background or experience necessary for leading a particular operation. The individual buyer usually seeks a business that is financially healthy, indicating a sound return on the investment of both money and time. Almost all the purchasers of the smaller businesses fall into this category.
A serious buyer should have the answers to the following questions: Why are you considering the purchase of a business at this time? What is your time frame to find a suitable business? Are you open-minded about different opportunities, or are you looking for a specific business? Have you set aside an amount of capital that you are willing to invest? Do you really want to be in business for yourself? Are you currently employed or unemployed? Are you the decision maker, or are there others involved?
Buying an existing business has many advantages over starting one from scratch. Below are five of them: 1. Established An existing business is a known entity. It has an established and historical track record. It has a customer or client base, established vendors, and suppliers. It has a physical location and has furniture, fixtures, and equipment all in place. The term “turnkey operation” is overused, but an existing business is just that, plus everything else. New franchises may offer a so-called turnkey business, but it ends there. Start-ups are starting from scratch.