The number of potential buyers generally depends on the size of your company. In the marijuana industry, there are special considerations. In Colorado, for example, an owner (and therefore buyer) of a marijuana business must be a resident of the state for a minimum two years – UPDATE: As of January 1, 2017, ONE owner (can be minority shareholder) MUST be a resident of Colorado for at least ONE year. Furthering narrowing your field, your buyer must have adequate cash to complete the transaction since the banking industry is under limitations imposed by the Federal government, eliminating institutional loans. There are also limitations placed on outside (non-institutional) investors (generally speaking, they must be arms-length loans) UPDATE: this has eased a little, too–MED now has three classes of Permitted Economic Interest. Finally, marijuana businesses are on the cutting edge and therefore carry if not additional risk, at least the stigma of additional risk, so your buyer has to want to spend his or her cash on a business in a new industry. All of this significantly narrows your field of prospective buyers.

Despite these limitations, there are still many people seeking an opportunity to get into the marijuana business. Your company will sell.

Our approach and preparation for sale will be different depending on which purchase group is being targeted. Though the categories we outlined are not exact, determine the size group that coincides with your business:

Company Categories
Approximate Company Size Approximate EBITDA Annual Sales Range
Very Small < $250,000 < $1 Million
Small $250,000 – $1 Million $1 Million – $3 Million
Medium $1 Million – $2 Million $3 Million – $10 Million
Large > $2 Million > $10 Million


Likely buyers for each size of company are as follows:

Likely Buyers by Company Size
Buyer Group Very Small Company Small Company Medium Company Large Company
Individual Highly Likely Highly Likely Low Likelihood Not Likely
Investment Group Very Rare Low Likelihood Highly Likely Highly Likely
Private Company Very Rare Low Likelihood Highly Likely Somewhat Likely
Public Company Very Rare Very Rare Low Likelihood Highly Likely


We have different approaches and procedures we use depending on which Buyer Group is targeted. For example, individuals take more of a “touch and feel” approach, requiring less of a formal package put together and wanting to see the business and talk to the owner. Institutional groups prefer formal packages to do their vetting, and only visit a company once some investigating is complete.

The old theory that one will always get a premium if they sell to a strategic buyer no longer holds true. Motivation of the buyer is a key factor, and it is worthwhile to understand each group’s typical motivations to understand why we maintain many relationships with each type of buyer group.


The individual buyer represents the largest number of prospective buyers for very small to small privately-held businesses. Target companies typically have gross revenues up to $3 million. The majority of individuals interested in buying a business are those who have lost their job, dislike their current working arrangement, or have always wanted to own their own business and feel it is safer to buy an existing business than to start a new business.

Most individual buyers seek companies that they can envision themselves operating, have a diversified customer base, have verifiable financial records, and demonstrate profitability that can at least provide them their most recent salary, after debt service, with an upside potential for growth. These qualifiers give individual buyers confidence in the viability of the business going forward.

There is no shortage of individual buyers. Though some are permanent window shoppers who are around because they enjoy the chase, there are numerous candidates that are serious buyers, ready to pounce on attractive opportunities.

Individual buyers typically struggle in their pursuit of larger businesses due to higher down payment requirements and to sellers uninterested in waiting until the individual is able to raise enough capital. We find individuals to be excellent candidates for businesses on the small scale.

The Investment Buyer

The most significant shift in the Mergers and Acquisitions (M&A) market in the last 20 years is the proliferation of Private Equity Groups (PEGs). PEGs currently number in the thousands. As early as ten years ago, PEGs only showed an interest in businesses with at least $5 Million EBITDA. This dropped to $2 Million and now there are PEGs seeking businesses with EBITDAs of $1 Million, and even lower in some cases. PEGs raise capital, put it to work (buy companies), cash out (sell companies), and reinvest or return the money to investors. The key is that they need to buy companies to complete the cycle. The proliferation of these groups have increased the pool of buyers and, in most cases, creates a shortage of supply of companies for sale. It is always a seller’s market, as long as the business for sale meets the PEGs’ requirements and is priced competitively.

Though so many PEGs exist, nearly all seek the same characteristics in businesses they buy. PEGs want:

  • predictable and sustainable cash flow
  • management in-place (no need to bring in new management)
  • low customer concentration
  • defensible market position
  • manufacturing preferable, distribution okay
  • minimal risk (a topic for another day)
  • realistic growth opportunities
  • limited environmental & legal risks
  • scalability
  • attractive exit
  • a strategic add-on to an existing portfolio company or ability to use as a platform company

We know the private equity market well so you don’t need to know it. There is nothing wrong with selling to the private equity market, in fact we have found it to be advantageous over strategic buyers in some situations.

The Strategic Buyer

Strategic buyers are usually public or larger privately-held companies or private equity firms that own a company synergistic with the target company. Strategic buyers may pay more than other types of buyers because they gain a variety of financial benefits and quick business growth. We say “may,” because this is not always the case.

Generally, strategic buyers target companies that have gross revenues over $3 million, offer a unique attribute not readily available to their own company, such as a new market or customer not previously served, or product lines or services not previously provided, but synergistic to their own customer base. Target companies are especially attractive in situations where economies of scale are possible–where the acquiring company can obtain post-deal expense savings, such as the elimination of dual facilities, support staff, or other overhead expenses (for example, a large payroll company that buys small payroll providers gets to discard nearly all of the expenses incurred by the acquired payroll companies after purchase, because the customers are rolled into the large payroll company).