For a business to sell, there has to 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 concerned about the financials, and seems to be overly concerned about price. Unfortunately, buyers have to 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. It is these differences that ultimately determine how the business will do. The price may not be the right question for the buyer to ask. What is usually the most important question is how much cash is required to buy it.
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 being transferred to a place that they don’t want to move to, or are very unhappy in their job. Surveys indicate that about half of the people in the county are unhappy in their jobs. People buy a business to change their lifestyle. A recent newspaper article quoted a very successful business woman, who left her job and bought a book store because she was “looking for a change, a way to be more rooted and be at home more.”
The make-up of a typical buyer
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 $100,000 in liquid funds to use as a down payment.
- Most buyers are looking at businesses priced at about $100,000 to $250,000.
- 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
Sellers should take a second look at those who express interest in their business. If the prospect has very few of the above traits, perhaps the seller should move on to the next potential buyer. On the other hand, if you are a buyer, or think you are, take a second look at the traits of the serious buyer. If you don’t have many of them, you may not be as serious as you think. You might want to rethink the reasons for owning a business and be sure that this is the right decision for you.