External Factors


Often times there are factors that that influence what a buyer will offer that have little or nothing at all to do with the quality of your business. Some of these factors would be:

  • The presence of multiple, competitive buyers in the market or marketplace can at times influence what buyers are willing to pay. Conversely, the lack of competitive buyers or a single buyer in a particular market can influence what a buyer is willing to pay. Obviously, in both scenarios, the fact that one company was willing to overpay or in the other, another company did not have to overpay, as a matter fact could underpay given the sellerís motivations, has little to do with the quality of the potential seller.
  • A potential buyer may have an existing business operation in the market that is not performing well. It might that an acquisition would well be that the last thing a competitor would consider in order to avoid creating additional challenges, such as integrating an acquisition, to the local team. The potential seller may have a wonderfully performing business, be ready to sell, and the buyer, under normal circumstances would be willing to acquire, maybe even at a premium, but they simply canít because of the risk it presents.
  • The presence of a franchisee or other legal arrangement may preclude an otherwise potential buyer from considering the acquisition of another company.
  • A potential buyer deems the market in which your business is located is of limited strategic value regardless of how attractive a potential and willing seller may be. This may be especially true if your business is large relative to the size of the marketplace. For instance, if the potential seller is a clear number # 1 in a secondary or smaller market, there are buyers that will not be interested, particularly a strategic buyer, because their analysis may show that there is very limited upside. In this case the risk of slow deterioration of the business is very real and greater than the limited potential upside. Again, the potential seller may have an impeccably performing business but because of factors external to the business, the pool of potential buyers may be limited.
  • The stability of the local market economy.
  • The timing is not right for either the buyer or the seller or both despite the long-term interests of both. This is why it is critical that the business owner have an objective in mind on order to determine what a compelling purchase price would be and the "rational" basis for determining this asking price. This exercise prepares a potential seller to objectively discuss his or her terms with a buyer when the opportunity presents itself.