Qualifying Prospective Business Buyers
Regardless of the overall economy at any particular moment, good businesses sell quickly. As such, if your business is doing well and priced fairly, you will generate a lot of interest. It can be quite overwhelming to deal with all of this activity and more specifically, weeding through the pool of interested buyers.
Certainly, having a competent third-party representative will ease this burden substantially and pre-qualify the parties. Nevertheless, a lot resides on your shoulders when deciding with whom you should be continuing a dialogue.
The most obvious issue that has to be addressed and satisfied is a buyer’s ability to actually execute the deal. This goes beyond their financial ability to complete a transaction however that is paramount of course. To this end, it address this concern right from the start. Although seller financing (as discussed in another article) will likely be part of the deal terms, you need to see demonstrative proof that a buyer has the resources necessary to make a purchase. For some people this can be an uncomfortable question (like asking someone how much they make a year), but you have to deal with it and do so quickly. If not, you will waste a ton of time with buyers who will never be able to complete the transaction.
The second issue relates to the actual individual themselves. ? When you want to witness buyer remorse in its full splendor there is no better environment than selling a business. Do they have the determination and willpower to go through with the purchase? Learn what the buyer’s goals are, why they want to buy a business, how long have they been looking (the longer they have looked the more likely they will never buy). Personally, whenever I have sold one of my companies, I want to find a buyer who actually needs to buy a business, and not somebody who just wants to buy one.
A seller also needs to really get to know the buyer. Spend time with them. Do not only meet under formal situations. Get into their heads and learn what makes them tick. You want to find out what their experience is in business, what are their strengths and weaknesses, what obligations they have and other characteristics. You may be asking why you need to know all of this – you just want to sell them your company and get on with your life – right? It is a valid point but remember, if you are going to participate in the financing, you certainly want to be sure, to the best of your ability, that they are the right person to operate the business.
Conversely, you may encounter a buyer who has all the right attributes but lacks the financial resources, Depending on your situation, you may find yourself wanting this individual to take over the business. You may just get a sense that they are the ideal candidate and you want to see the business turned over to them. In that case, you can find creative ways to make the deal happen.
Regardless of your reasons for selling, and just like a buyer has to purchase the right business, so to must sellers find the right person to sell their business to, and the only way to accomplish that is by effectively qualifying each prospect.