For a business to sell, there must be a seller – and a buyer. The buyer of today is a bit different than the one of yesterday. Today’s buyer is not a risk-taker, is overly concerned about the financials, and seems to be overly concerned about price. Unfortunately, buyers must understand that they cannot buy someone else’s financial statements. The statements might be a good indication of what a new buyer can do with the business, but everyone does things differently.
Today’s buyer is finicky, due certainly in part to the fact that, he or she is not a risk taker. Quite a few buyers enter the business buying process and, at the last minute, cannot make the leap of faith that is necessary to conclude the sale. The primary reason that buyers actually buy is not for the reason one might think. Money or income is about third, maybe even fourth on the list.
Buyers buy because they are tired of working for someone else. They want to control their own lives. In some cases, they have lost their job, or are very unhappy in their job. Surveys indicate that a large portion of employees in New Zealand are unhappy in their jobs. We more often than not see people buy a business to change their lifestyle and have more control over their future.
The typical small business buyer usually has many of the following traits:
- 90 percent are first-time buyers. In other words, they have never been in business before
- Almost all of them are looking to replace a job. Business brokers primarily sell income substitution
- Most buyers will have about $50,000 to $200,000 in funds to use
- Most buyers are looking at businesses priced at about $100,000 to $400,000
- Most buyers want an income of $100,000 and more
- Most buyers will not have sufficient funds to pay cash for a business
Obviously, many other types of people go through the process of looking for a business. However, those buyers who will eventually purchase a business have most of the characteristics outlined above. Going a step further, the serious prospective buyer usually possesses the attributes described below:
Who is a serious buyer?
- Has the necessary funds and they are readily available
- Can make their own decisions
- Is flexible in the type and location of a business he or she will consider
- Has a realistic and sincere need to buy
- Has a reasonably urgent (within three to four months) need to buy a business
- Is cooperative and willing to listen
- Can see value in the business they are looking at
It is our job as Business Brokers to marry up serious buyers with motivated sellers of serious business opportunities. If a buyer has a large portion of these traits, then they are a very good prospect and shouldn’t be disregarded. A deal is most likely able to be made, but with potential compromise from both parties as serious buyers don’t, unfortunately, come along every day.