Question

What do buyers of small businesses really want to know?

Answer
By Brian Mazar, MBA, CBI | Last updated: September 15, 2023

Before answering the question, it makes sense to first ask why people want to be in business for themselves. What are their motives? Countless surveys and studies have been done to address this question. The top four answers to this age-old question are listed below:

  1. They want to "do their own thing" or "control their own destiny";
  2. They do not want to work for anyone else;
  3. They want to make better use of their skills and abilities; and
  4. They want the opportunity to make more money.

The biggest reason people want to be in business for themselves is to be their own boss. The first three reasons listed revolve around this theme. Some may be frustrated in their current job or position. Others may not like their current boss or employer. Still others feel their skills and abilities are not being used properly or sufficiently.

Something important to note is that making more money is listed as the fourth reason. Although making money is certainly important and necessary, it is NOT the primary reason people want to own their own business. Once a person decides to own their own business, he or she needs to explore how. Starting a business is certainly one option, but it is an option fraught with risk. Buying an existing business is the method most people prefer. Purchasing a known entity reduces the risks substantially.

There are some key questions buyers should want answers to once the decision to purchase an existing business has been made. Below are the initial questions to ask. Note: a prospective buyer may not want to answer all of these, but a seller certainly should be prepared to respond to each one.

    • How much is the down payment? Most buyers are limited in the amount of cash they have for a down payment on a business. After all, if cash were not an issue, they probably wouldn't be looking to purchase a business in the first place.

    • Will the seller finance the sale of the business? It can be difficult to finance the sale of a business. Therefore, if the seller isn't willing to finance a portion of the sale, then a buyer must be found that is prepared to pay all cash. This is very difficult to do.

    • Why is the seller selling? This is a very important question. Buyers want assurance that the reason is legitimate and not because of the business itself.

    • Will the owner stay and train or work with a new owner? Many people buy a franchise because of the assistance offered. A seller who is willing (at no cost) to stay, and help the owner transition is a big plus.

    • How much income can a new owner expect? This may not be the main criterion, but it is obviously an important issue. A new owner has to be able to pay the bills–both business and personal. And just as important as the incomes is the seller's ability to substantiate it with financial statements or tax returns.

    • What makes the business different, unique or special? Most buyers want to take pride in the business they purchase.

    • How can the business grow? New owners are full of enthusiasm and want to increase the business. Some buyers are willing to buy a business that is currently only marginal if they feel there is a real opportunity for growth.

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    Brian Mazar, MBA, CBI
    Brian is the Managing Director/CEO of American Fortune LLC, a business sales and acquisitions advisory firm based in Louisville, Kentucky.  Brian has advised business owners in every industry on all aspects of mergers & acquisitions.  

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