Other Ways To Find Buyers

The steps that follow are necessary to consider only if your initial marketing campaign to sell your business isn’t generating adequate results.

So, if they’re not coming to you, you may need to go to them. 

Some of the tried-and-true approaches outlined below have risks. Chief among them is the risk of jeopardizing confidentiality. Many people assume that when a company is for sale, it’s on shaky financial ground. You don’t want to lose valuable clients, vendors, or employees because of negative assumptions that people make when they learn that your business is for sale.

But for those of you who want to branch out further with your marketing strategy, I have some additional suggestions you may want to explore, starting with an obvious but often overlooked one … 

Consider People You Know

Sometimes, you don’t have to go far to find the perfect buyer. Does anyone you know seem to be a possible candidate? Has anyone expressed interest in purchasing your company in the past?

• For Small Businesses: There are people in your life who dream of owning a business like yours. You’ll never know who they are until you start trying to connect with them. Once you begin talking to the people you know for ideas, potential interests, and references, you may find that you have a world of opportunities at your feet.
• Word of Mouth: You can do a lot of marketing via your personal network. People love to share compelling stories. If your business is well known, then word of mouth may be enough to spread the news that your business is for sale. Cast a wide net. Spread the word about your intent to sell among your friends, acquaintances, and business contacts. Inquire with people you know, but remember: if you do so, you must be prepared for the public to learn of your plans quickly.
• Print, Direct Mail Marketing, and Advertising: There are a number of areas where you can look to place a classified ad, such as trade publications or periodicals geared specifically to your industry. 

Selling to an Employee or Management Team

Often, employees or your management team may have aspirations to become business owners. Your own team may be a source of potential leads to buyers, or it may be the cause of conflicts and hold-ups if not handled properly.

What are the benefits of selling to an employee?

Employees are familiar with your business operations, strengths, customers, competition, and unique advantages in the market. Your current managers, or people in their networks, may have distinct insider knowledge that allows them to quickly make a decision, which can be one of the most efficient sales experiences any seller can hope for.

What are the drawbacks of selling to an employee?

An employee may not have the financial resources necessary to buy your business and invest in the future growth of the business. It can be an adjustment to go from being an employee to being an owner, even for the most aspiring entrepreneur. 

To sell to an employee, be prepared to finance all or part of the sale or arrange for a bank to finance the transaction. 

Disclosing to your team members that your business is for sale may cause some disruptions. Employees may fear the upcoming change and leave their positions, or may even attempt to undermine the sale. 

If you begin serious discussions with the wrong person, the dynamic shifts from an employer-employee relationship to a business owner’s relationship with a business owner. This can cause tension in the work environment throughout negotiations and ownership transfer, especially if discretion is not maintained and confidentiality is not respected. 

Employee Stock Ownership Plans (ESOP)

Employee stock ownership plans are plans in which employees can buy shares of a company under specific terms. 

Not often seen in businesses with less than $5 million in annual revenue, ESOPs are complex and expensive to establish. They often require the specialized knowledge of accountants, tax advisers, and lawyers for ongoing re-examination and re-certification to keep the plan compliant with all regulations.

Employee stock ownership plans are one way to integrate employee ownership in a company, often positively affecting the employees’ commitment, dedication, and productivity. In some cases, selling to one or more employees may also have tax advantages.

Although the process varies, typically, the ESOP plan purchases stock at its inception, using a bank loan. Employees can receive shares as compensation, like a 401(k), with the potential for the ESOP shares to vest immediately or over time, as with a pension plan. As employees reach retirement age, they will have options to diversify their ESOP holdings away from company stock or cash out. 

An ESOP structure may make sense for your business, but these normally yield the lowest sales price and are often used only as a last resort.

Professional Contacts

There are many other contacts you can reach out to in order to broaden your marketing strategy. 

These professionals are in contact with potential buyers every day. Keep in mind that if you establish a relationship with any of these professionals, and it results in a successful sale, it’s best to compensate them for their facilitation.

• Accounting and Legal Professionals: Close advisers, such as lawyers and accountants, get to know the business owners they work with and may be able to connect you with their clients or someone in their network. Most firms have specialized groups in focused industries; you want the information for the group that specializes in your industry. 
• Consulting Professionals: These people are in close contact with senior executives and can be in a terrific position to connect you with buyers. When you’re contacting a professional at a consulting firm, attempt to reach the most senior-level contact possible. Research their portfolio and industry specialties, and approach them with a professional introduction that clearly indicates why you’re contacting them. 
• Industry Associations: In your local community, in your state, and nationally, there are likely multiple associations for professionals in your industry. These organizations connect people in the same and overlapping businesses and bring them together through online forums, trade shows, events, and industry-specific publications. Learn the names of the major associations and gain membership if necessary. Reaching out to other members, advertising within the organization itself, or participating in an event could introduce you to a range of potential buyers. 
• Active and Retired Senior Executives: Current or retired executives in your industry often have extensive networks and may be less conflicted about recommending potential buyers. Using your knowledge of your industry, both local and widespread, consider executives who may be able to refer you to others in their network or who may be potential buyers themselves.

Other Potential Buyers

There are a few other areas to consider where you may find potential buyers.

• Employees of Competitors: A competitor’s employees or management team may be interested in buying your company. Of course, it can be hard to find the right employees to approach. There is no magic formula to finding competitors’ employees. It’s generally done by word of mouth, through local classified advertising, or trade press advertising. In some cases, more aggressive buyers will contact business owners directly or through a third party.
• Customers: Often, your best customers are those who are your biggest fans. They promote your business within their circle because they love what you offer. They may make large purchases on a regular basis, or they may have approached you about business deals, offers, or opportunities in the past. Don’t overlook this important group of potential buyers.
• Suppliers: It’s common for businesses to acquire other businesses with which they are already connected. Sometimes referred to as “vertical integration,” this type of acquisition can complete the value chain for a company expanding into new industries or areas.