Putting your Boston business on the market is a major decision with a lot of moving parts. One of the most important things you’ll do early in the process is define your ideal buyer, so that you can screen actual buyers against your criteria. Many owners think about funding, industry experience, and similar factors. Another thing you should consider is the buyer’s motivation for buying your business. Strategic and financial buyers often have different approaches. The right business broker or M&A firm is critical to helping you determine which is the right fit for your company. Here are the things to know as you weigh the options to sell a business.

Strategic vs. Financial Buyers: The Basics

Strategic buyers purchase companies because they hope the purchase will fit into a larger strategy for their own business, or for a group of businesses. For example, you might have valuable intellectual property that makes their business more competitive.’

Financial buyers see the company itself as an investment for which they hope to earn a significant return. They often appear in the form of private equity firms that hope to make a company significantly more profitable while reducing costs over three to five years. Their goal is to find companies with great growth potential, help them realize that growth, then sell to the highest bidder.

The two terms are a bit misleading, because both buyers care about corporate strategy, and both have financial incentives. In either scenario, your company wile be more attractive if it is already successful with growth potential. The main difference is how each type of buyer assesses and weights various factors.

To Whom Should I Sell My Business?

There’s no best buyer for every business and industry. Instead, the ideal buyer depends on your industry and goals. Ultimately, you want to get top dollar while seeing your company move in a direction you approve. Some considerations to weigh include:

• Your reason for selling. If you are only looking to maximize profits, no matter what happens to your business or your workers afterward, an auction can create a competitive bidding landscape that drives the price higher. A strategic buyer will likely be the best fit, since your company may serve as a valuable asset to their company. Financial buyers typically seek lower prices.
• Your hopes for the future of the company. If you want covenants included in the deal addressing how your business is run or what happens to your staff, a strategic buyer could still be a good fit. This is because PE firms usually have a specific formula for streamlining companies, and are unlikely to acquiesce to a lot of owner demands or sacrifice significant control over the company.
• Your long-term plans for involvement. If you want to remain on board after selling in a consulting role, a financial buyer could be a good fit. This is because they typically have plenty of money to run a company,  but may lack industry connections or expertise. Strategic buyers often already have people on board who know the industry.

An M&A advisory firm is critical to successfully selling your business to a buyer who understands your mission and goals. Don’t try to do this yourself. A once-in-a-lifetime transaction demands support and expertise.