Russel Cohen

Russell Cohen

Russell Cohen
Who Is The Buyer?

Who Is The Buyer?

March 2015

Buyers buy a business 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:

  • Laid-off, fired, being transferred (or about to be any of them)
  • Early retirement (forced or not)
  • Job dissatisfaction
  • Desire for more control over their lives
  • Desire to do his or her own thing

A Buyer Profile

Here is a look at the make-up of the average individual buyer looking to replace
a lost job or wanting to get out of an uncomfortable job situation. The chances
are he is a male (however, more and more women are going into business for
themselves so this is rapidly changing). Almost 50 percent will have less than
$100,000 in which to invest in the purchase of a business. In many cases the
funds, or part of them, will come from personal savings followed by financial
assistance from family members. The buyer will never have owned a business
before, and most likely will 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, job disagreement (or discouragement). 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, it probably is in fourth or fifth place in the overall list.
In order to pursue the dream of owning one’s own business, the buyer must be
able to make that "leap of faith" necessary to take 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

  • 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?
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