6. How to Identify Qualified Buyers
You may be encouraged by the vast number of potential buyers responding to your business-for-sale ad, but surprisingly, the majority of respondents never make a purchase. That’s why it’s important to distinguish the window shoppers from the qualified buyers you feel comfortable entrusting with your business.
Finding the Right Buyer
People respond to business listings for different reasons, ranging from simple curiosity to competitors taking the pulse of the market. Some may respond to your ad honestly and show an actual interest in purchasing your business but, in fact they lack either business skills or financial resources. On the other hand, not all sellers place their priority on making a quick exit at a reasonable price. For some, especially for businesses that have been in a family for generations, it may be more important to spend some time finding a buyer who has the experience, skills, and enthusiasm to successfully operate and grow the business. In situations like these, following your instinct may ultimately play a greater role in your decision.
Determine What You Are Looking for in a Buyer
In order to sort through the possible buyers, you need to establish a set of criteria for screening ad respondents. Decide what you require from a potential buyer in terms of their business experience, the amount of cash you will require on closing day, the timeframe in which you want to close the sale, and any other non-negotiable terms, such as retaining the company name. If you plan on financing part of the sale, set parameters for the type and amount of collateral required for your loan.
Narrowing Down the Prospects
Ideally, you included the obligation for the respondents to provide information right in the response form on the ad: why are they interested in your business, what is their financial status, time frame, and experience. If you do not have this information about prospective buyers, ask your broker to help you collect it. Using the information available, answer the following questions:
- Is the buyer specifically interested in your business or market area?
- Does the buyer possess the necessary education, licenses, certifications, or experience?
- Is the buyer interested in making a purchase within your timeframe?
- Does the buyer have the ability to meet your closing day payment expectations?
- Is the buyer qualified for an SBA, other third-party loan, or do they meet your seller-financed loanqualifications?
Prospective buyers with predominantly “yes” answers are good possibilities, while those with mostly “no” answers are probably not good prospects. Ask those with “maybe” answers to supply you with more information about their qualifications so you can better determine their eligibility.
Verify Buyer’s Information
In addition to answering your questions, serious prospective buyers should be willing to provide you with proof of their financial information, professional licenses, and other related documents. If you’re working with a business broker, they should be able to assist you in verifying this information.
Qualified buyers should expect you to request this information, but may ask that you sign mutual non-disclosure agreements (NDA) prior to releasing it. You should also ask them to sign a NDA prior to disclosing any sensitive information about your business.
Having a structured process for screening and identifying qualified buyers, plus enlisting the help of professionals will greatly improve your chances for a smooth and successful business sale. When the time comes to make a final decision on a certain buyer, follow your gut instinct. In the end, you’ll feel much more comfortable transitioning out of your business knowing that you’ve left it in good hands!