Identify and contact individuals and businesses that might be interested in buying your business.
Objective
Create a target list of prospective buyers with the goal of contacting them and ascertaining their interest, timeframe, and capability to make the purchase.
Tasks
Brainstorm competitors and complimentary adjacent businesses that might be interested in your assets and business proposition. Research their market position and recent acquisitions. Determine the right approach based on their needs and criteria.
Best Practices
In Step 6 we talked about how the BLS is essentially an inbound marketing program. You drop some lines in the water where fish are reportedly hanging out and hope some bite on your bait (your listing). Inquiries are inbound.
Buyer Prospecting is about OUTBOUND marketing. You go to them; you don’t wait for them to find you. You cast your lines in very specific spots, at very specific depths, using very specific bait. No other business is fishing there except you.
Most small businesses don’t take this step. They don’t do any buyer prospecting. In fact, many business brokers don’t do buyer prospecting either. They rely exclusively on the BLS. This step could be your edge. Let’s look at how to prospect for qualified buyers properly.
First, cast a wide net for prospects:
- Start with affinity businesses you know in your region. You may have met the owners at trade shows or the local They could be direct competitors, indirect competitors, suppliers, vendors, or companies in adjacent markets that might like to own a business (or location) like yours. List them and rank them as to their probable interest level based on what you know of them.
- Do a search and Identify the bigger companies in your industry or served market that are not in your region. This could include companies These are companies you may not have heard of before or have had little or no interaction with.
Hint: As a rule of thumb, look for companies that are five times your size in terms of revenue. You can outsource this research work to a capable freelancer. You might be surprised who they come up with. I’m in the business of knowing who’s who in most industries, yet my researchers always identify players who could be potential acquirers that I had not known about before.
- Depending upon the nature of your business, consider franchise businesses that might like to convert your business to a franchise unit, or buy your location if you own the building or have a long-term
- Research recent investments and acquisitions in your market. Private equity groups, family offices, and/or venture funds that have invested in or acquired businesses like yours are good Put them on your prospect list.
- Reach out to local business brokers who have sold businesses like yours in the last two Most brokers can be found by doing a Google search, or by visiting BizBuySell and clicking the Business Broker tab. They love to brag about businesses they sold! In the course of selling a business similar to yours, they likely dealt with a number of interested buyers who lost out on the deal. One of those buyers might be interested in your opportunity. Of course, you may have to pay them a referral fee if they introduce you to a buyer who ends up acquiring your business – but not always. Some brokers represent buyers and have an agreement with them to get paid if they identify sellers that match the buyer’s criteria. See Step 9 for more info on dealing with buyer brokers and intermediaries.
- Circulate your teaser to leaders of your industry trade The people who work for trade groups often know of members who might be interested in making acquisitions. These trade association professionals look for opportunities to ingratiate themselves with the executives of their largest members. They might be able to get your opportunity in front of the right decision makers.
Second, after you have compiled a list of buyer prospects and done some research on each of them, you need to identify the right person to approach.
Larger companies usually have someone tasked with mergers and acquisitions. They typically have an M&A or corporate development title. In smaller companies, the right person to approach is the CEO, CFO, or COO. Sources to identify the right person to approach:
| 1. The company’s website | 2. Linkedin | 3. Crunchbase |
| 4. Hoovers | 5. Lead411 | 6. Lexis Nexis |
| 7. GlobalData | 8. ICD Research | 9. MarketLine |
| 10. PrivCo | 11. SGA ExecutiveTracker | 12. Timetric |
Some of these sites require a subscription, but some offer free trials, so you can often get access long enough to retrieve the data you are looking for. There are many other sources of company owner/executive contact information. With a little digging, you can usually find the name, title, email address and phone number of the right person to approach.
If you’re pressed for time because of EVERYTHING else you need to do to sell your business, outsource this task to a freelance company researcher. Sites like UpWork, Guru, and Fivrr are good for this kind of work. You can usually hire someone for less than $10 per hour, or do what I do, pay them only for a valid, deliverable name, email, phone number, and their Linkedin profile URL so I can study up on them. Rates vary, but $1 per name is a good price target.
Third, after you have compiled your buyer prospect list and the appropriate contact information for each, you need to craft your approach.
A short email is usually best, followed by a phone call. If you really want to get their attention, send them a letter by FedEx or other overnight courier service, or a Telegram (yes, people still send telegrams, and they are quite novel to those who receive one).
There’s a trick to making contact in a way that does not disclose your business if you wish to keep it confidential unless and until they sign your NDA. I’ll cover that in the Tip section below. Here are some best practices for making the initial contact and piquing their interest:
- Make it about THEM, not about Mention a recent acquisition they made, or a milestone they achieved, and how your proposition could augment that acquisition or milestone. Quickly identify the FIT with their corporate goals and strategy, based on your research.
- Highlight what your business can offer them that they likely want but don’t already That could be new customers, new location/expansion, more revenue, skilled workers, more market share, intellectual property, vertical integration, equipment, systems, and processes, and/or a specific competitive advantage.
- Offer to send them more information or be available for a call at their
- Invite them to pass along your email or letter to colleagues if it is not a match for
The initial contact should be no more than one or two paragraphs. The subject line should be on point, i.e., “Unique Acquisition Opportunity for [Name of Company]”. Try to make each email you send unique and customized to each prospect. Avoid looking and sounding like a form letter! Email servers are very good at sniffing out form emails and directing them to the user’s or company’s SPAM folder.
If you don’t receive a reply within three days, give the contact a call. You will likely reach a gatekeeper or the contact’s voice mail. Leave a short message, like: “Mr. X, my name is Y and I am following up on an email I sent you a few days ago regarding the sale of my business. We are in the final stages of entertaining interest from buyers and before we take you off the list, I was checking to see if you might want a closer look at the opportunity. I think our business might be a good fit with your goals.” Leave a number and email address where you can be reached.
It’s not uncommon to hear nothing back. That’s fine, everyone’s busy, your proposition is not likely a burning need at the moment. A lot of prospecting is timing. You might want to send a second email and leave a second phone message if you don’t hear back within seven days. In that second follow up, ask if there is someone else at the company, or an advisor to the company, you should follow up with. That sometimes prompts the contact to delegate to an associate or outside broker or intermediary.
If you receive responses indicating they have no interest, respond immediately and thank the contacts for their time. Tell them to feel free to share the opportunity with colleagues or get back in touch if they run across someone looking to acquire a business like yours. Wish them great success with their business and let them know you will be following their progress. This little tidbit is a nice courtesy and often keeps you front of mind. You never know what may prompt them to think about you in the future and want to round back. Send them an invitation request to connect on LinkedIn.
If and when you get positive responses and the contacts or the associates of the contacts request that you send more information, be prepared to respond immediately. You need to hit it while it is on their radar, otherwise they will have moved on. Everyone has other fish to fry, and you will get lost in the shuffle if you wait too long to follow up. Also, be prepared to get a call out of the blue from someone you reached out to, or their assistant or broker. See tips below for how to follow up with a positive response from your prospecting efforts.
Tools and Tips
Upon getting a positive response from someone you reached out to, send them your blind teaser and ask if you can send your NDA, or if they have an NDA they prefer to use. The bigger companies and private equity groups often insist on using their NDA because it has already been vetted by their counsel. Read it carefully and make sure there is no language that allows them to share your information with those not covered by the NDA or circumvent you and make contact with your customers or employees without your permission. Most companies know the drill and their NDAs will be fair. Others won’t mind signing your NDA.
If they refuse to sign an NDA, it’s up to you to decide what, if any information, you want to disclose to them. Some may not want to sign an NDA until they have qualified the opportunity for themselves. Be cautious, some might just be out to collect competitive intelligence. You are generally safe disclosing information that is already publicly available. It’s a good practice not to get too chatty and inadvertently disclose sensitive information to those who have not signed an NDA.
In any case, after you have shared the blind teaser, had an initial introductory phone call, and signed the NDA, go through the Buyer Qualification Steps outlined in Step 8.
Regarding prospecting and discussions with interested parties in a way that maintains the confidential nature of your business until an NDA is signed, you have three options:
- Use an intermediary like a broker, accountant, or business They can use their company name, email address and phone number when reaching out to prospects. They can keep things on the Q-T until the prospect has signed the NDA and you (or they) have qualified the buyer.
This will likely cost you some money, but you can usually find a competent intermediary to perform this work on an hourly basis. You may end up spending a few grand on buyer prospecting and qualification, but it may result in surfacing the best buyer. It’s well worth the investment!
- Use a generic email address and phone service to contact prospects. You can even use an alias, but it’s not Serious buyers like to know who they are dealing with. Use your own name and title or use your nick name. You don’t have to disclose the name and location of your business until after the prospect has signed the NDA.
- Use your name, title, company name and email address, but don’t say your business is for Say you (and your partners) are exploring the opportunity to sell the business and are contacting them to see if they would have an interest in discussing it. If you use this method, you should postpone Step 6 and not advertise on the BLS.
Summary
Buyer prospecting involves casting a wide net and compiling a list of potential buyers and the appropriate contact information at each company. It may involve notifying local brokers who have sold businesses like yours and/or who represent buyers. It includes doing some research on the prospects and then reaching out to each with a short, compelling business proposition.
Even if those you reach out to are not interested, they may know someone interested in acquiring your type of business. I once contacted the CEO of a company to see if his company might be interested in acquiring my client. He was not interested but he said his next-door neighbor, of all people, was looking for a business to buy. Sure enough, he put me in touch with the neighbor and he did indeed pursue the opportunity. Unfortunately, he lost out to a higher bidder, but I have him on the list for future opportunities! You just never know who knows who and where an inquiry might lead.
Examples
- Types of Buyers
- Sample Email to Buyer Prospects
- Sample Phone Script and Message