Making the initial decision to sell one's company is tough, but once that decision is made, there are a number of different options for potential buyers.  Small and medium-sized businesses are more sophisticated than ever, and the parties purchasing these businesses can come from varied backgrounds.  Here is an overview of the most common categories of business buyers in today's market.

Family Members

People within a business owner's own family may express interest in buying the family business. In fact, a family member is one of the more common types of small business buyers.  One reason for this is that a business owner is often more comfortable with a relative taking over the prized business the owner may have built up from the very beginning.  In many situations, the family member looking to take over the family business has been carefully groomed and tested over the years to ensure that he or she is ready to be the true "heir apparent."  In this kind of situation, the family member truly is the best person to buy the business.

However, there is a downside.  Family dynamics can be quite complex, and a variety of conflicts may develop.  Issues may quickly arise ranging from whether or not the departing business founder can really leave the business to whether or not the new buyer actually has the funds to make the purchase and the skills to run the business successfully.  These, and similar issues, can cause significant disruption in the transaction of the sale.  In short, families come with histories and complex, internal issues. As a result, selling to a family member can lead to discord within the family.  For this reason, an outside buyer may be the best option.

When it comes to determining whether or not a family member is the right buyer for a given business, it is necessary to look at three vital issues: the ability of the family member, the financial standing of the family member and the agreement amongst the family.

Selling a Business to a Business Competitor

Business competitors are frequently overlooked when it comes time to sell a business.  Why?  Usually there is a concern that a competitor will take advantage of the knowledge that a business is up for sale and may try to attract customers or employees away from the selling business.  Yet, if the business for sale meets the needs of a competing company, they may be willing to strike a good deal in order to acquire the business and expand.

When it comes to selling a business to a competitor, a business intermediary can be quite useful.  The intermediary will use confidentiality agreements so that the name of the business being sold is only revealed after the seller has been consulted and the competitor/potential buyer has been further qualified.

Selling to a Foreign Buyer

Buying a business in the United States is the dream of many foreigners.  There are a number of reasons why foreigners find business ownership in the U.S. attractive. For one, by purchasing an existing business many foreign business owners are able to bypass difficulties such as licensing, finding a job in their own profession, and other issues that may arise with their language barrier. 

This kind of buyer is often accustomed to working very long hours and is already a successful business owner in his or her own right.  Yet, this does not mean that their business acumen will coincide with that of the seller.

Dealing with Strategic or Synergistic Buyers

A strategic or synergistic buyer is one who believes that a business for sale would complement his or her own existing business.  By acquiring the new business, this buyer hopes to be able to lower costs, gain new customers, or incur other important benefits and advantages.  It is interesting to note that synergistic buyers often will pay more than other buyers due to the fact that they see tangible, and perhaps even immediate, benefits for making the purchase.  Strategic buyers rarely look at small businesses, but instead seek out mid-sized companies that meet their overall criteria.

Financial Buyers

Financial buyers may likely come with a long list of demands.  The bottom line for these buyers is that they want maximum leverage.  Yet, they also fall into the right category for a seller who wants to continue to manage his or her company after it has been sold and perhaps retain a minority interest that will grow in value.  If the seller is willing to stay and work with financial buyers they often make non-financial provisions that could be important to the seller, such as maintaining the location of the business, retaining key employees, etc.  In general, financial buyers are only interested in a business that is able to grow at a good pace and yield enough profits to support both the existing management and provide a return on the investment to the owner.

The Individual Buyer

The majority of sellers of small businesses will probably be dealing with the individual buyer.  Quite frequently these buyers are mature, ranging in age between 40 and 60, and are experienced veterans of the corporate world.  For these buyers, business ownership is not just a dream, but a dream that they now can afford.  Understanding what this kind of buyer wants is a key component in making the deal happen.

In general, any buyer that is looking to replace an existing job is a decent prospect.  The best prospect is an individual who has alread bought and/or owned a business. Owning a business is clearly much more involved than being someone else's employee, and these new responsibilities and potential risks can frighten many prospects away.  Yet, this category of buyer has a deep internal need or "drive" which may help make the deal happen.  Further, the individual buyer may approach the deal with fewer strings attached or the other assorted complications that come with the other types of potential buyers.

One Final Thought

Sifting through the various potential buyers to find the right one can be complicated.  As a result, it is helpful for a business seller to have the assistance of a professional business intermediary. They have the experience and knowledge to identify the pros and cons of various buyers for the specific business for sale.