What Motivates a Business Buyer to Buy a Business?

I have identified four types of business buyers defined by their motivation.  Understanding what motivates a buyer to acquire a business is critical in aligning their needs with a seller's needs to structure a deal.  Here are the four types of buyers: 

1. The Strategic Buyer.  The strategic buyer is looking to purchase a similar or like business, or business in their value chain, e.g., supplier, distributor or retail outlet.  Their objective is to enter a new market, increase market share, or reduce their overhead or supply/distribution costs.  Revenue and sales price per unit are typically of more importance than EBITDA or Seller's Discretionary Income.
2. The Turnaround Expert.  The turnaround expert looks for deeply discounted asset purchases of declining or closed businesses.  They are looking to purchas a business where they have confidence they can buy for a low price, turn the business around, and then sell it for significantly more money than what they paid.
3. The Financial Buyer.  The financial buyer is an investor and is most concerned wth the return on their investment. This buyer looks for two types of businesses.  The first type is a business generating a consistent, respectable annual return.  These businesses are often refered to as cash cows.  They will price the business based on the return they expect to receive.  The second type is a start-up or high-growth business.  This buyer looks to add their management expertise and additional investment to take the business to the next level.
4. The Job Buyer.  The job buyer is typically a displaced or disenchanted individual from the Corporate world who would like to control their own employment/destiny through business ownership.  This buyer looks for a business where they can leverage their business knowledge and expertise, pay themselves and adequate salary, AND receive an adequate return on their investment.

If you are interested in learning more about buying a Florida business, please contact Eric J. Gall at 239.738.6227 or eric@buysellflbiz.com. Also, check out Eric's personal webpage at www.buysellflbiz.com and the FBX webpage at www.fbxbrokers.com.

What motivates a business buyer to buy a business?