How to Find a Strategic Buyer for Your Business
The search for a strategic buyer can start as soon as you open your doors. These 7 tips will help you find the best prospects.
From the very beginning, make decisions with an acquisition in mind
Build a business that investors and savvy business owners will want to buy
Make connections in the community and your industry
Build partnerships with other companies
Look at your strategic partners — they could be the buyer you need
Identify companies that could benefit from the strengths of your plumbing or HVAC business
Customize different pitches for each prospective buyer
Look at the biggest investors in your niche
Always be ready to answer questions about your business
You will almost always get a better price for your business if you sell to a strategic buyer. Strategic buyers need your business. Your plumbing or HVAC business enhances their business or rounds out their portfolio in a very useful and profitable way.
When you sell to a strategic buyer, you help them build value. In return, they are going to offer you a better deal than a general investor. Finding a strategic buyer can be one of the most critical steps when selling your plumbing or HVAC business, but this essential element is overlooked by many sellers.
To create as much value as possible when selling your business, you need a strategic buyer. But how do you find someone that fits this description? Use these seven tips to lead the way.
1. Make decisions with acquisition in mind
Your search for a strategic buyer can start years before you plan to sell your business. Some savvy entrepreneurs start thinking about acquisition the very day they found their businesses. But everyone's journey is different.
You may spend your life building up your HVAC or plumbing business and decide to sell when you're ready to retire. Or, you may launch a start-up with the goal of being acquired.
Regardless of your situation, as soon as you have acquisition in mind, start making decisions around that goal. Think about what investors want to see in your industry and make decisions accordingly. Build your business in a way that will make it appeal to investors and buyers.
This can take a variety of different forms. If you're creating a start-up, for example, you may want to focus on a product, technology, or solution that you know will get snapped up in the marketplace. On the other hand, if you have an existing business, you may want to build recurring revenue streams, ensure your business can run without you, and make other strategic decisions to enhance the business's value.
2. Build partnerships with other companies
Through the course of your business, try to create economically viable relationships with other businesses. If you work with other companies in marketing partnerships or joint ventures, you create an acquisition continuum.
When you have relationships with other companies, you can more easily identify where they strategically fit with your business. Perhaps more importantly, your partnership can pique their interest and help you assess if your businesses could work well together and be a good fit for a merger.
Ideally, as you start and grow your business, you should develop partnerships with an eye on the long-term potential for mergers and acquisitions. When you're looking for a strategic buyer, you should mine those partnerships for prospects before looking anywhere else.
3. Identify buyers that will benefit from your business
Different buyers will see different strategic value in your business. If your HVAC business controls a certain area, for example, a business that wants to expand into that geographic market may benefit from buying you. If a residential plumbing company is trying to launch a commercial division and you have a lot of commercial service contracts, that business may have a strategic interest in your company.
Make a list of your business's strengths and assets. Then, look for companies that are lacking in these areas. These may be the buyers you need to target.
4. Customize your pitch
When selling your business, don't forget about basic marketing essentials. You need to target your pitch to prospective buyers. Ideally, all of your sales materials and your offer should be crafted to meet the specific needs of each unique buyer.
A personalized approach strengthens your sales pitch. It also helps ensure you get the best offer possible from that prospect.
5. Be prepared to answer questions
To ensure you never miss an opportunity with a potential buyer, you should be ready to answer key questions about your business. Ideally, you should know your topline revenue, gross profit margins, and basic profit ratios. You should be able to answer questions about your customer base, churn rates, satisfaction levels, and the value of your contracts.
If you're armed with this information, you don't ever have to worry about missing a potential opportunity. Whether you're at an industry conference or on the sidelines of your kids' soccer game, you should be ready to talk business if a strategic buyer presents themselves.
6. Make connections
In that same vein, make sure that you're making connections all the time. This is important as you start and develop your business, but it can also be invaluable when you're trying to craft your exit strategy.
Attend professional mixers or networking events in your local area. National conferences can also be useful for making connections. You may be surprised at the people you meet who want to buy businesses.
7. Look at the most significant investors in your industry
There are often big investors who target certain industries. If you're trying to sell a plumbing or HVAC business, for example, look at the most significant investors in that field. Find out what they're looking for and decide if your company might be a good strategic fit. If so, tailor a pitch and go for it.
To find the best strategic buyer for your business, you should work with a mergers and acquisitions specialist. A specialist has relationships with investors and business owners who want to expand. They can leverage their network to help you find a buyer, and even more importantly, they can ensure you structure your deal in the most advantageous way possible when you sell.
Contact SF&P Advisors to get help finding a strategic buyer today
At SF&P Advisors, we help companies in the plumbing and HVAC industry navigate mergers and acquisitions. If you're looking for a strategic buyer, we can help. To learn more, contact us today for a free valuation of your business.