You know your buyers

Most owners think there is one buyer for their business. There is not. There are five kinds, and each one pays a different price for the same company.

Here are the five.

A strategic buyer already runs a business like yours, or one that fits next to yours. They buy you to grow, to enter your market, or to take out a rival. Because they can fold your company into theirs, they can often pay the most.

A PE platform is a private equity fund building a large company from the ground up in your sector. Your business could be the base they build on. They pay for a strong, standalone company that can lead a roll-up.

A PE add-on is that same kind of fund, but they already own a company in your space. They bolt yours onto it. They move fast and price sharp, because they have done this before and they know their number.

A family office invests a wealthy family's money. They often hold for a long time and care about steady cash. They can be patient, but they rarely pay the top price.

A search fund is one or two people who raised money to buy a single business and run it themselves. They are careful buyers. They need the business to run without heroics, because they are the ones who will run it.

Same company. Five buyers. Five different numbers.

That gap is real. In one case Cordis reviewed, a specialty industrial firm got an inbound offer at $42M from a strategic. When a full process ran, the strategic bids came in at $42M to $52M. The financial bids came in at $38M to $44M. The winning bid was $51.5M, from a more aggressive platform builder. The owner had assumed her business "should price at about 5x." Her real number was 25% to 40% higher. She almost walked away from that, because she did not know who was coming.

That is the point of this chapter. If you do not know the buyer types, you anchor to the wrong number. You take the first offer, or you dismiss a real one, because you cannot tell a fishing letter from a serious approach.

Knowing your buyers also changes what you show them. A strategic wants to see how you fit their plans. A search fund wants to see that the business is not just you. The same facts land differently depending on who is reading them.

And here is the part owners miss most. Buyers read you before you finish your first sentence. In the first ten minutes of a meeting, a buyer scans the room. Who do people turn to when you step out? Is there a clear second-in-command, or does everything run through you? When they ask a simple number, do you know it, or do you reach for a binder? They have mostly made up their mind before the tour even starts.

You cannot fake that in the room. But you can know what they are looking for, and you can know which of the five is likely to come for a business like yours.

The work is not to charm the buyer. The work is to know the field. Know the five lanes. Know which ones are active in your sector right now. Know that an inbound letter is information, not pressure. Someone with money has named your business as a target. That fact alone tells you something no inside analysis can: the market is open.

When you know your buyers, the first number stops being the only number. It becomes the opening number. That is a very different thing.