The Pros And Cons of Selling Your Business To An Outside Business Buyer in Orlando
The Orlando Business brokers at Crowne Atlantic encounter a wide variety of businesses where their owners are looking to sell. When analyzing a business for sale, business brokers in Orlando discuss different types of buyers that may have an interest. There are industry buyers, those that are currently in the industry or have a great deal of experience in the industry, and there are also outside buyers which are buyers that are not currently in the industry of the business that they are looking at buying. Often times outside buyers do not have any prior experience in industries they are looking into. As always there are some Pros and Cons to working with an Industry Outside when selling your business in Orlando. See below:
1) Outside business buyers in the Orlando area typically offer business sellers in Orlando a higher price than industry business buyers.
While it is not 100% of the time Central Florida Business Brokers find that buyers that are industry outsiders pay more for businesses than industry buyers. One main reason for this is that industry buyers may have the knowledge to start up a business from scratch using a fraction of the money needed to buy a business. In contrast, an outside buyer might take years to accomplish the same start up and financially it might make more sense for them to purchase a business instead.
2) Everything is new to an outside buyer so they have to purchase the company to gain experience in an industry they are essentially buying into.
One of the reasons why outside buyers purchase businesses is because they lack the experience in the industry they are looking at entering. Often times buyers look at the seller with a bit of admiration of the great job they have done by growing their businesses into successful empires. This buyer and seller relationship often makes for a friendlier transaction as outside buyers are likely to have more questions about the operations than criticisms. This is because outside buyers will not have their own processes and procedures to compare to more likely to do what the business seller recommends.
3) Confidentially might be easier to maintain when marketing to Orlando business buyers outside of your industry.
Even when business brokers in Orlando have each buyer fill out and sign Confidential Nondisclosures and Buyer Profiles there are still confidentiality risks when selling a business. If confidential information leaks out to outside buyers it is not as risky as when sharing sensitive information with a potential inside buyer who could potentially use that information for further competition. Working with outside business buyers is a potential tactic business sellers can use to maintain confidentiality in Central Florida,
4) Outside Buyers can bring different sets of skills to the table.
Outside buyers often have skill sets that can benefit the businesses they are purchasing. Orlando and Central Florida business buyers are often experts in marketing, advertising, financing, management and communications. At the same time many business brokers in Orlando will often meet with business sellers who feel their businesses could use more marketing, social media, and reaching out to customers in order to help grow their business. With these issues in mind, an outside buyer bringing in a different take on everything could be just what an established business needs.
5) Outside business buyers in Orlando are more likely to keep the staff and the brand.
There are a lot of business owners who have loyalty to their employees and feel that their company brands are superior to others. They want a buyer who will continue the legacy, the name, the brand and continue to employ their employees who have been loyal to the business this whole time. Many wish that their employees would be able to purchase the business, but their employees do not have the funds available. So the next best thing a business seller can do in Orlando is to find a buyer who will allow current employees and managers to stay on and keep the branding and the work environment the same.
This issue can often occur when a business buyer is more interested in cash flow than they are technique, quality customers, and company culture. For example, business owners that have patents for the products they sell can run into an issue on value. Their patent may have some additional value to those in an industry but an outside buyer may feel a company’s value is reflected better by it’s cash flow.
2) Depending on the business, obtaining financing, licensing, and the knowledge to operate the business might be too difficult for an outside buyer to accomplish.
Outside business buyers might have more difficulty following through on transactions without experience. Banks and landlords are typically more accommodating with business buyers that have experience in the businesses they are buying. Restaurant buyers without experience for example are likely to find more difficulty with landlords and SBA bank financing when looking to buy restaurants or bars. This is more due to industry norms than the individual buyers. Both landlords and banks typically have experienced more payment defaults in the past from businesses in these industries so they express there is a higher risk factor when working with these industries.
3) The process of training and familiarizing outside buyers with the processes and procedures of a business might be much more difficult and time consuming than familiarizing an industry buyer with the business.
This one might go without saying, but training someone from the ground up might take more time and effort. Business owners might feel that a higher purchase price makes the extra effort on familiarization worthwhile.
4) Outside business buyers in Orlando are less likely to overlook the drawbacks of a business.
Many industries have certain drawbacks that those in the industry just accept and they deal with them. Buyers who have never worked in those industries before may not be able to glance over those drawbacks as easily. Potential industry drawbacks may include high-employee turnover, high insurance rates, the need for excess working capital or lack of customer contracts set in stone. Some industries are just not physically clean or dangerous such as scrap metal yards, construction businesses or tree services. For example, there are industries that are notorious for high employee turnover. For example, businesses with rough working conditions can be vulnerable to high-employee turnover and it might be unavoidable. Industry buyers are likely to accept these conditions and outside buyers may have a tougher time accepting them.
5) A business seller’s employees, customers, and vendors may not respond as well to an outside buyer verses an industry buyer.
While we do not see this happen in Orlando and the Central Florida area when buyers looking to purchase businesses, there is a possibility it could be an issue. Depending on an industry, outside buyers may have more difficulty relating to a business’s customers, employees, or vendors. To counter this, many sellers spend extra time with business buyers making introductions to everyone involved in the process. These measures are often a huge assist and advantage for the buyer and it is this familiarization that helps justify purchasing the business.
To check out our Orlando Business Selling Article on The Pros And Cons of Selling Your Business To An Industry Buyer in Orlando click on this link: The Pros And Cons of Selling Your Business To An Industry Buyer in Orlando.