The Pros And Cons of Selling Your Business To An Industry Buyer in Orlando
One of the main topics discussed when business brokers in Orlando first meet with a potential business sellers are the types of buyers buyers that might be interested in buying their business. At Crowne Atlantic we typically talk about the advantages of working with an Industry Buyer verses and Outside Buyer. Industry buyers are those with experience in the industry due mostly to work experience, family or business ownership. In contrast Outside Buyers typically have very little exposure or experience in the businesses they are looking to purchase. In this article we are going to discuss the Pros and Cons working with an Industry Buyer.
Crowne Atlantic Business Brokers in Orlando typically discuss these scenarios when we work with business sellers to help fine-tune the marketing approach for when seller is ready to sell their business. See below five pros and five cons to working with an industry buyer when selling your business in Orlando and Central Florida.
1) An industry buyer will better understand of the value of buying the business.
When we say value, we’re not just talking about price. Value also refers to the non-monetary assets and benefits of a company. Our business brokers in Orlando recently sold a company that had constructed a database of 5,000 potential customers complete with emails, names, and the correct contact decision maker. Does that list have a direct monetary resell value? It did, but not necessarily to a buyer not familiar with the industry. Would this potential customer information list be valuable to an industry buyer? Absolutely!
2) The training and familiarization period could potentially be easier and shorter with an Industry Buyer verses an Outside Buyer.
One can imagine that if they are selling a business to a buyer that is already in their industry that the transfer of power might be easier. When selling a healthcare business in Orlando, it might be easier to sell to a buyer that currently owns a healthcare business and is already an approved licensee under the Florida department that oversees healthcare.
3) Industry buyers can often incorporate the company’s current infrastructure to excel both their company and the one they are buying.
If a Millwork business purchases another Millwork business in Orlando it might increase the work capacity of both businesses allowing both the business, it’s employees, and current owner to grow. Both companies could advance and make more money.
4) An industry buyer could potentially give the seller of the business an opportunity to stay and work for a while before officially retiring.
Some business sellers want to just slow things down, but not stop working entirely. There are industry buyers and even those who are outside buyers that want sellers to stay. A perfect example of these buyers are equity companies. After all, an Industry Buyer could be a person or another company buying in Orlando. Equity companies looking to expand will often times ask the business seller to stay on run things for them locally while they working growing the business on a more statewide and perhaps nationwide level. This can offer business sellers the time and the space to advance financially while having assistance and resources to run and grow their business.
5) If the business transactions involve strict licensing to operate, bank financing, difficult landlords, or demanding customers an industry buyer might be a business seller’s best and only option.
For some businesses, an Industry Buyer is the best and only choice an Orlando business seller has. While a plumbing business in Florida does not require a license to own, it does require a plumbing business to operate under a person’s plumbing contractor’s license. If a business requires a license to operate, banks might choose not to finance business buyers unless they possess that licensing. Landlords can also be difficult to deal with if a potential business buyer has no experience in the business they are buying. For example, there is a large fine-dining restaurant on the market where the landlord stated that a buyer/ new tenant will only be accepted if they have fine-dining experience. This hurdle does limit the amount of business buyers in Central Florida that will qualify.
There are also the Cons of selling a business in Orlando to an Industry Buyer. Lets take a look at some of the Cons below:
1) In the Central Florida and Orlando area many industry buyers do not always pay as much for businesses as Outside Buyers.
This can easily occur with service businesses where the bulk of the assets being sold are customer bases that could easily continue as business customers or potentially leave if they do not like the new business owner. An Industry Buyer might not value these customers as much as a business buyer who is trying to get into the industry and using their business purchase to do so.
2) Keeping confidentiality with Industry Buyers might be more difficult and risky for the business seller.
If a business owner is looking to sell to an Industry Business buyer in Orlando it means that they have to disclose their name and ultimately some details about their operation to potential competitors. While business buyers working with business brokers in Orlando always sign confidential Nondisclosures prior to receiving information, there can always be a slight chance of a confidentiality breach. One way to completely avoid this scenario is by having a business seller clear all of the names first prior to releasing information to them. This is a simple tactic but it works.
3) A business seller might dislike or distrust other competitors in the industry and might want a buyer from outside the industry.
Some potential business sellers in Orlando do not want any industry buyers to know they are even for sale. After all, Orlando and Central Florida can be a small community for some industries where everyone knows one another. There are some business owners who my say, “I want to sell my business in Orlando to someone outside of my industry.”
4) Industry buyers might try to make drastic changes in a business they purchase.
While outside buyers are more likely to leave everything as is, an experienced industry buyer might make a lot of changes. They might switch everything to their own processes and that could potentially frustrate employees and a business owner used to their own ways and methods creating potential headaches for everyone involved.
5) Selling to an Industry Buyer can make the potential pool of buyers much more limiting.
If Orlando business brokers at Crowne Atlantic work with businesses that are extremely large and require special licensing such as a roofing businesses or an electrical companies. Selling to only to Industry Buyers does limit the pool of buyers. Not having proper licensing can affect a buyer’s ability to obtain Bank/ SBA financing. While buyers could still pay cash, there are only so many business buyers with the licenses or the capital required for certain deals.
As Orlando Business Brokers servicing the Central Florida and Greater Florida area, we typically have to examine both the pros and cons of both types of buyers. We can do the same for you!
For more information on The Pros And Cons of Selling Your Business To An Outside Buyer in Orlando click on this link below:
If you’re looking to potentially sell your business in the Orlando or Greater Florida area give us a call and we can help you evaluate your business. Our number is 407-478-4101 or check out our website at www.crowneatlantic.com.