Sell Your Business for More with a Sale to a Strategic Buyer
What is a Strategic Buyer?
Most business sales involve the sale of a business to another owner/operator who will continue to operate it as a standalone business. In this sale, the price is based on what is called the “financial” value and the buyer is a "financial buyer". This value is based on the financial results of the business being sold – the asset value, income value, or market value. However, in other sales, where one business is bought by another business, the buyer may have some unique strengths that make the business being bought more valuable to it. This is referred to as a “strategic” value and the buyer is a "strategic buyer".
Here are some examples of strategic value. When the buyer combines the acquired business into his business, he can eliminate some expenses such as redundant people, rent, and outside services. These savings go straight to the bottom line. Another example is a business with a product or service and a weak marketing or sales operation. A larger company, with a related product line, good marketing, and a large sales force, may be able to increase sales and profits considerably. The acquiring company can estimate the increased the sales, profits, and what the acquired business is worth to them. This is the strategic value to them.
How to Get a Stategic Buyer to Pay More
Selling businesses for their strategic value is what investment bankers seek to do. They identify the best buyers, approach them, and attempt to get competing offers for the business. They usually market the business without a price since a price would put a cap on the sale price. The size of the businesses they sell typically have sales over $100,000,000.
We offer a similar sale process to smaller businesses. We combine the investment banker process with the business broker marketing process to reach the most, and best, buyers for the business. Investment bankers are typically selling businesses that are well out of the financial reach of individual buyers. Because of the large size of the businesses they are selling, the potential buyers are large, there are not many, and they can be relatively easily identified. With the smaller businesses we sell, there are many more potential buyers and adding our Internet and other marketing reaches many strategic buyers who may not be identified.
This is a brief explanation of how we market businesses differently to sell to a strategic buyer. For more information, contact us for a free, no-obligation, consultation.