Identifying Your Buyers
This is one of the most overlooked secrets to a successful business renovation and sale so read closely!
Knowing your buyers is a vital factor that is most often overlooked by sellers and business owners, but is ESSENTIAL for a fast and profitable business renovation and sale.
Remember, a business sale is the same as the sale of any product or service, you must know who your target market are, what they most desire and what they are most fearful of.
To make the most profit from your business renovation and sale, you MUST know who your buyers are.
It will help you decide what areas of your business to focus on so you don’t waste time and effort, and it will also help you clarify your goals for your business and your lifestyle, depending on who your ideal buyers are. Who are the buyers?
The 5 Types Of BUYERS
There are 5 types of business buyers and it is important that you identify which types of buyer will be interested in your business, and that you renovate and present your business to satisfy their wants and needs as much as possible.
Here is an overview of the 5 types of buyer and what they are looking for – bear in mind that some overlap and that these are generalisations, but it is enough to get you thinking about who you are going to sell to and what they are looking for:
1. PAYG buyers
These are people who are currently in a job and are looking to get into business. Some will be smart (like you!) and know how to find a bargain business or negotiate hard – they are not your buyers!
Your ideal PAYG buyers are looking to buy security and a dream, they want everything to be easy, they want systems in place so they can transition into business smoothly, and they are willing to pay a premium for this.
They are the buyers who would also be interested in a franchise for the same reasons. If these people are your target market (usually if you are selling a retail business, cafe, trades or service business, transport or cleaning business, or small and home based manufacturing or wholesale business), then when you renovate, these are the areas you should focus on most – strong Systems and the business relationship with it’s List.
These people have usually held a very senior role in a business or corporation. They will be used to earning a high income and working long hours, and they have experience in running larger businesses in a corporate style (not as an owner).
They are usually looking to buy for one of two reasons, either to get out on their own and take charge of their own business and built an asset for themselves, or to have a complete life change and work from home, with low hours, and low staff.
They will generally be looking in the $300,000 to $2million price range. The first group like to see big potential, they want a business that is going to grow and need higher level of management, they like to see systems in place but room for improvement, and seem to be attracted to strong Brand and IP because they have come from a world that values this.
The second group are looking for low working hours, ability to run from home or a phone, ability to have management in place so they aren’t a slave to the business. For this you need good systems and automation, and the ability to have the business run under management.
3. Industry Players/Competitors
This group are focused on the List – they want to expand their customer base and take out their competition – they are basically buying up sales. So they are looking for a strong List, and may also be looking for unique Intellectual Property that they can buy up and either exploit or remove from the market.
If you buy a business in an industry where there are big players, you have the opportunity to sell for many times your net profit because of the value of your LIST or INTELLECTUAL PROPERTY.
4. Serial Entrepreneurs
Tend to be very business savvy, experienced and at the moment – cashed up. They need to invest their money and are looking for business that they can put under management. They like to see Systems in place and a good strong List and Brand. They often like real Property with the business too because many have made a lot of money from business property.
5. Private Equity
These groups are investing other peoples money into business and there are lots around with plenty of cash right now. They need to buy deals so can be very motivated. Usually look for the bigger businesses with EBIT over $2million, but will look at bolting together a few smaller businesses. They like to see strong Systems, Brand and IP.
It is very important to have a succession plan and strong business plan – bear in mind that they are investing Other People’s Money so they want to find businesses that are a “safe bet” while still with good potential to grow and benefit from the added funding that they can provide.
Actions To Take This Week:
It is very important that you make a list of the buyers in your market or industry that would be interested in your business, and highlight the ones that would be most desperate to buy your business (and therefore pay the highest price).
1. Open your Renovation Roadmap and fill in your top buyers and their wants and fears
These buyers might be specific individuals (like your competitors or a big player in your industry), or it mey be the general category of buyer.
What are they looking for? What is most important to them? What are they afraid of? What would put them off your business? The more your business fits their needs and relieves their fears, the higher price you will be able to ask.
Now you also have a clearer picture of the Areas of Value you need to focus on first. Open your Renovation Roadmap and write down your goals for each Area of Value. For some the goal may be to leave it alone, for others it may be to strengthen, build, protect or create.
2. Review your business goals from the first EClass
Are your goals for the business the same as your ideal buyers? What may need to change? Can you align them so you are building the business you want while still creating a valuable asset that your buyers will want too?
In the next Eclass
Next week we are going to start your renovation! In the next eclass, we are going to go into much more detail about how to quickly renovate your figures and profits, and how to know where to zero in to get the best results the fastest.
In the meantime, if you have any questions, just email us at [email protected] and we’ll be happy to help.
See you next week,
MATT AND LIZ