The 4 Kinds of Buyers you Will Encounter When you Sell your Business in Keller, TX
When you are looking to sell your business in Keller, TX, there is a lot of leg work that goes into how you eventually leave your company. There is a lot of careful planning involved, numerous considerations and a whole lot of time to smooth out the edges in the selling process. You can take many routes when you sell your business in Keller, TX.
Regardless of the route taken, one of the key aspects of a business sale is the buying party on the receiving end.
When you set off to sell your business in Keller, TX, you will typically encounter 4 kinds of buyers for your business. As you market it to them, they look at the business in a different light. Depending on whom the final sale is made to, the sale can manifest in unique heading for the business in the future. Thus, knowing about the buyer type before you plan for the sale can help you plan out the best outcome for your business after you have moved on.
1. Another Business
It’s not uncommon for businesses looking for the pursuit of growth and expansion like to acquire businesses in the same industry. Depending on their overarching growth strategy, they may buy your business if they consider it to be the right move. The main focus of these buyers is their own strategic interest in your company, rather than historical performance (although this does count).
If you are looking to sell your business in Keller, TX, to another business, you may actually afford to ask for a higher sale price. If the buying company sees that your company compliments their own, they may pay a hefty premium on the sale. There is a downside to this, however. Your business does provide synergy to the buying business but the overlapping functions and employees will be let go. Another drawback is the brand name that you have established over the years stands to be overshadowed by the acquiring company.
Evaluate the sale of your business carefully in order to reach the best decision. If you are looking to sell your business in Keller, TX, making immediate (cash) returns, then this type of buyer would be appropriate.
2. Holdings
Holding companies are made to own other companies. They are not involved in the process of selling goods and services of their own. Rather, they make an earning from “holding” the company’s stocks. They earn revenue in the form of dividends given out from the companies they have a major stake in.
If you are planning to sell your business in Keller, TX, you can sell part or most of your shares (50% or more) thereby generating instant cash from the sale of equity. You still get to retain some stake in your company like running some or all of the operations. However, there will be members in the board who will have a major say in decisions necessary for running the business.
If you’re looking to sell your business in Keller, TX to a holding company, you can even use some of your proceeds to form your own holding company. This may make you eligible for some tax relief in certain circumstances.
3. Private Equity Firms
These firms are responsible to manage the pool of investments of institutional and individual investors alike. There is a need to understand some key definitions in order to see how these firms operate:
Limited Partner (LP): The investors (individuals or institutions) part of a private equity firm. They can be wealthy individuals looking to put their income to good use, pension funds or institutional parties.
General Partner (GP): The private equity firm itself.
How these firms operate, put simplistically, is that limited partners invest into the funds that general partners use in purchasing companies. These companies may be in a specific or a group of industries (so the GPs don’t spread themselves too thin).The portfolio of companies bought by the GPs is held over a period of 5 to 7 years. The executives of private equity firms seek the growth of the companies held by them to get a hefty profit once the companies are sold off. This profit is distributed to the stake holders (limited partners) and part of it is kept by the general partners.
If you are looking to sell your business in Keller, TX, private equity firms can be a lucrative yet opportunistic route for you to do so. You can still have a stake in your business. This is because the private equity executives get a lot of financial muscle and business know how to the table. They even let the owners stay on to manage the on ground operations. Your business’s potential can be realized fully.
They hold a major stake in your company and will be responsible for major decisions, however. Given that they have stakeholders to satisfy over the relative short term, they may not make the decisions which are important for the long term success of the organization.
4. Existing Employees
Last, but certainly not the least, your own employees may be the ones having a major stake in your business. This is different than the other options above to sell your business in Keller, TX. The other options involved a certain degree of change and resulting change management when you sold the company.
You can still have your company headed in the same direction that you had initially planned for it. All you need to do is to find a trustworthy and reliable person inside your company; someone with vision and decision making prowess. The simplest way to go through with this plan to sell your business in Keller, TX, is an Employee Stock Ownership Plan (ESOP). You can gently convert the company’s equity into employee’s retirement packages.
You may also have your employees buy your company shares from a loan in the form of a leveraged ESOP. The price of the shares is determined by an independent appraiser, however. ESOPs provide capable employees with a greater degree of control and input but a lack of administrative experience on their part may also mean hindrance in productivity for the company.
Encountered these types of buyers or any others while selling your business? Looking to sell your business in Keller, TX? Look no further than Kirksey Business Brokers where we help you find the right buyer for your business.