Which Is Better, a Financial Buyer or a Strategic Buyer?

 If you decide to sell your business to an outside acquirer, you’re going to have to decide between a financial and a strategic buyer—understanding the different motivations of these two buyers can be the key to getting a good price for your business.

A financial buyer is acquiring your future profit stream, so they will evaluate your business based on how much profit it is likely to make and how reliable that profit stream is likely to be. The more profit you can convince them your company will produce, the more they will pay for your business.

But there is a limit to how much they will pay, because financial buyers are playing the buy-low, sell-high game. They do not have a strategic rationale for buying your business. They don’t have an army of sales reps to sell your product or a network of retailers where your product could be merchandised. They are simply trying to get a return on their investors’ money, so they tend to buy small and mid-sized businesses using a combination of this investment layered on top of a pile of debt, and they want to buy your business as cheaply as possible with the hope of flipping it five or ten years down the road.

Because financial buyers are usually investors and not operators, they want you and your team to stick around, so they rarely buy all of a business. Instead, they buy a chunk and ask you to hold on to a tranche of equity to keep you committed.

A strategic buyer is a different cat—usually a larger company in your industry, they are evaluating your business based on what it is worth in their hands. They will try and estimate how much of their product or service they can sell if they added you into the mix. Because of their size, this can often lead to buyers who are willing and able to pay much more for your business.

If you are contemplating selling your business now or down the road, and especially before you are approached by a prospective buyer, you should gain this understanding of the different buyer motivations.  If you’d like someone on your side to help you plan, understand your options, and help you get your business ready and positioned for transfer to a new owner, please contact Frank Mancieri, frank@gtgrowth.com, (401) 651-1585, www.gtgrowth.com.

Sept 25 Business Event – Constant Contact: The Billion Dollar Idea Hatched in a Brookline Attic

 

Constant Contact: The Billion Dollar Idea Hatched in a Brookline Attic

Tuesday, September 25, 2018, 7:30-9:30 am
Bryant University – Bello Center, Smithfield, RI
Breakfast Meeting

Constant Contact was founded in 1995 and was sold 20 years later for one billion dollars…
Co-Founder Alec Stern was one of three who were responsible for the company’s hyper growth, transition through its growth stages, and the development of its impressive value. His wide range of responsibilities at the company included senior roles in strategic partnerships, channels, business development and sales. Leveraging what he learned as a business owner and leader, Alec was additionally responsible for the creation of Constant Contact’s channel partner programs. He also spearheaded strategic innovation, community-based entrepreneurism and vertical industry thought leadership for the company.
Adding to his Constant Contact successes, Alec has since worked with thousands of new and growing small businesses. He has distilled his knowledge and experience into strategies that help businesses adjust their perspectives and adopt effective tactics to cultivate their value.
On September 25th, Alec Stern will bring his hands-on company growth expertise to the Business Value Forum. We look forward to his first hand insights, and his ownership, leadership and advisory experiences.
Please plan to join The Business Value Forum and New England business owners, leaders and advisors for another important program and conversation over breakfast at Bryant University. We hope to see you there.
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The Business Value Forum, Inc. is a non-profit, non-member organization offering unique information, learning and connection opportunities to New England business owners, leaders and advisors.

Information & Registration: https://theforum-2018-09-25.eventbrite.com