In Selling Your Company, How Large of a Pool of Prospective Buyers is Appropriate?

There is no one-size-fits-all approach to the question of how large your target audience should be. It should be large enough to ensure that the interest of several (hopefully at least three and ideally ten) prospective buyers becomes very serious and generates several offers, but not so large that you are inundated with an unmanageable number of similar offers.

Buyers do not want to buy a “shop worn” business. They don’t want to feel that they ended up the owner of something that hundreds looked at and nearly all rejected it on the belief it was worth less than the buyer believed it was worth.

Conversely, if your target pool were so small that it produced only one credible prospective buyer, you lose a lot of leverage in negotiations. Even if the buyer does not know it is the only credible prospect, you lose negotiating leverage with that buyer, given you don’t want to risk that buyer walking away.

In many selling situations, and we think this applies especially the smaller the business is, you might only have a pool of several credible potential buyers. For larger businesses, the potential pool could be in the hundreds, and your job is to curate that pool down to a handful of the best prospects.

In your situation, you will need to compile a list of all potential buyers and then rank them according to your belief about their level of interest, their ability to purchase your business, and their ability or desire to pay the price you expect or demand. The larger your list is, the more options you have as you start to market, given you can work your way down the list without quickly hitting a dead-end.

GROW and SELL Advisors, wholly-owned by Traversi & Co., LLC, is a premier sell-side M&A advisory firm – a boutique investment bank – serving the lower middle market.  Visit us here.

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