Potential Buyers

In my experience, small and medium sized business (SMB) owners do not spend enough time thinking about the potential buyers of their businesses. There are a number of methods to transition a business, and the method you choose should align with your desired goals, whether it be immediate liquidity, leave a legacy or both.

Internal – A potential buyer for the business could be employees (ESOP), management team, existing business partners or family members.

Internal buyers can offer a great way for companies to transition ownership, preserve legacy and reward key people for their hard work and loyalty. However, it may take many years to develop this succession strategy.

External – A potential buyer could be a strategic buyer (i.e., competitor) or a financial buyer (i.e., private equity).

External sales tend to develop and close more quickly. External buyers can typically pay more to acquire the business due to potential synergies. However, external buyers will exert more control over the future of the business, and this can lead to potential dislocation with the employees and key people.