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Buyers come in all shapes and sizes, however we draw a general distinction between individuals/partnerships and companies/private equity:
The primary motivation for individual buyers is loss aversion. Growing the business is important, but due to the fact that they are generally using their own money, the key consideration is how much risk they are taking on. The focus for individual buyers tends to be towards purchasing an income stream. Generally, they will be looking to run the business themselves.
They normally have a set amount of money to spend, and therefore will be looking for the best deal within their budget. In saying this, if your business is stable and has an excellent credit rating, buyers might be eligible to take out an SBA (Small Business Administration) loan to purchase the business using finance.
Some examples of individual buyers might include corporate employees, online entrepreneurs with experience looking to add more businesses to their portfolio or owners of traditional businesses that want to move into the online space.
If you are targeting individual buyers, it can be a good idea to place emphasis on how defensible the business is, aiming to display staying power in the market. For this reason, businesses with proprietary products or developed brands are the most attractive to individual buyers.
If we're talking about businesses valued at over $2m, then we are dealing with a 'different kettle of fish'. Companies will often be looking to acquire their competitors,
suppliers or other strategic businesses that can make up a valuable component of their business as they move into the future. Key considerations of companies are where the synergies lie, how they can use the combined resources of the business they are looking to acquire and their own to grow the business, expansion into new markets, and the positioning of the brand in the market. If your business is dealing with a reputable supplier, or has developed proprietary products, they might be driven to acquire these trademarks and relationships to distribute through their network. Companies that are looking to grow through acquisition tend to have access to credit, and can move quickly if the right deal presents itself.
Private equity and investment funds on the other hand, are driven by the requirement to provide a return on equity to shareholders. They need to be acquiring companies, as cash sitting idle in a bank account doesn't make investors happy. Investment funds have the ability to act fast on quality deals, and can access lines of credit should they be required.
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