Simply, if there are a number of businesses for sale in a particular industry segment, or in a particular location, then competition will be limited and prices will reflect that. Business sellers will have to accept what is offered by business buyers if they want to sell. Occasionally, there may be more buyers seeking a limited opportunity in an industry segment or location than businesses available. Price increases can be expected as a result of competition for the limited opportunity. Business buyers will have to pay business sellers their price if they want to acquire the opportunity.
For example, depending on locations, there is demand for coffee shops at the moment. Supply of good coffee shops is limited and buyers can expect competition. There is limited demand for mechanical workshops and an over supply, particularly of smaller businesses. Sellers will need to reduce their price expectations if they want to achieve a sale.
Step 3 in buying a business is assess the market closely. Generally, there will be more businesses offered for sale in a location than there are buyers available. Occasionally, Supply will be limited. In circumstances where the supply of businesses of interest to buyers along with the number of buyers actively seeking that opportunity, then sellers can be expected to achieve what they want.
If there are a number of businesses opportunities in the market, then that favours business buyers. If the number of businesses opportunities is limited, that will favour business sellers.
Those buying a business would be well advised to be familiar with the market situation at the time they are looking to acquire a business.
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