How to buy a business in a seller’s market
A friend was telling me about how her neighbors landed their dream house in last summer’s real estate market. This couple had a small home but loved their neighborhood. So years ago, they picked out the houses they admired most and sent letters to the homeowners.
Last year, after one of those residents passed away, their kids found the letter. They reached out to this couple and sold the house directly – likely below what it would have sold for on the open market.
If you want to buy a business in today’s market, this might be just the strategy you want to take. Identify your ideal targets, reach out, and plant a seed. It might pay off now, it might take years, but it’s a way to build opportunity for your business going forward.
Build-your-own deal flow. If you’re serious about acquisition, we strongly suggest targeting passive sellers. Just like passive job seekers, passive sellers are business owners who aren’t actively looking for a buyer. But when presented with the right opportunity, they might be willing to make a change.
Plenty of business owners are happy to go this route – bypassing the advisor fees and the entire marketing process – and to negotiate one-on-one with a “high-fit” buyer. Meanwhile, you have a better chance of winning the deal you want without paying sky high prices.
That kind of outreach takes time and resources. You may need to reach out seven, eight, nine times. Let the business owner know you’re serious, and you’ll stand out from all the other “fishing” letters they get.
Even if you don’t find someone interested in entering negotiations right now, you can start to build a relationship. Make sure you’re top of mind when they do decide to sell.
I can’t tell you the number of sellers who come to us with a file of letters and people they’ve spoken to throughout the years. They already know who they like and who they want to talk to again.
Plan and be ready. Build a deal team (internal or external) who will help you identify your ideal acquisition criteria. Don’t wait for something that “only kinda fits” to hit the open market. With the right plan and outreach, you can create better opportunities that align with your needs.
Here’s the thing: Many owners think about selling when things are not fun. And with covid, supply chain, and recruiting issues, running a business is definitely challenging. It could be an ideal time to find a business owner willing to raise their hand and say, “Yeah, I’m interested.”
By Scott Bushkie
With more than 20 years in the Mergers and Acquisitions (M&A) industry, Scott is a recognized leader in the field, providing exit strategies, business valuations, and M&A advisory services to business owners in the lower middle market. He has successfully executed sales to domestic and international buyers, private equity firms, family offices, and strategic buyers. Follow DealCoach on Linkedin
DealCoach is headquartered in Green Bay Wisconsin with an office in Milwaukee Wisconsin and helps customers find out how much their business is worth with online business valuations and advisory services. Our business valuations also known as an Estimate of Value (EOV), help prepare buyers and sellers for the sale. DealCoach also helps business owners grow value with a Business and Market Analysis and plan for retirement, estate & financial planning, benchmarking, and strategic planning. DealCoach servers and has provided business valuations for businesses located in the United States and Canada.
We are here to tell you what you need to hear in order to make a well-informed decision with most likely the largest financial transaction of your life. Our team has over two decades of M&A experience, and we have been completing Estimates of Value for our clients for over nine years.