It is a great feeling to receive interest from potential buyers when selling a business. Let's face it – selling a business independently can be a lot of hard work and a major time commitment, and when people show interest in what you are selling it can translate into a quick, painless sale.
Unfortunately, communication between a buyer and a seller is not always simple for a variety of reasons.
For one, communication over the Internet puts forth inherent challenges. It is not always clear exactly what someone is saying or asking when it is typed online, and it is easier to ignore or forget about a message when it is not directly spoken.
In addition, business owners who list their establishment for sale on the Internet often have to deal with many inquiries from browsers who enter into a conversation without any serious interest in purchasing a business.
If business sellers are not savvy in how to address these types of situations, they might find the selling process to be longer and more frustrating than necessary.
By following some simple communication guidelines when selling your business online, you can ensure you don't get caught up in a communication nightmare.
Step 1: Be Knowledgeable About Your Business
Know your business before you put it up for sale.
It sounds simple, but the fact remains that many business owners list their establishment for sale online without having a clear grasp on how much their business is worth and what facts to communicate to potential buyers.
The first step is to get all the financial information of your business in order, including cash flow and revenue numbers that span from the time you first owned the business to the current day. After you list your business for sale, you'll undoubtedly have to field legit financial questions from potential buyers, and you won't want to come off looking irresponsible or uninformed about your own business.
From there, make sure you know what your business is worth. One of the easiest ways to obtain this information is to access a comparables report (https://www.bizbuysell.com/business-valuation-report/) online at sites such as BizBuySell.com. This type of report will provide you with an accurate valuation of your business based on factors such as gross income, cash flow and geographic location.
Once you have this information, you'll be armed with concrete evidence to back up your asking price should buyers ask about it or attempt to propose a price that is out of the range of what you are willing to accept.
When you have made yourself an expert on this basic information, you can confidently put your business on the market and begin communicating with prospective buyers.
Step 2: Identify Serious Leads
Once you have listed your business for sale online, it's time to sit back and wait for the buyer leads to come in. Unfortunately, it is likely that some of these leads will not be from serious prospects, and it will be up to you to decide if an inquiry seems legit enough for you to devote a large amount of time and effort into following-up.
It is difficult for online business-for-sale marketplaces to screen potential buyers to find out if they are genuinely willing to act on their entrepreneurial dream. This means that as a business seller you will have to develop the skills to determine this for yourself.
Some of it comes from experience. The more prospective buyers you deal with, the more skilled you will become in figuring out their validity and true motives.
But much of your ability to screen is making sure you become and stay aware of small signs that can provide valuable clues into the mind of a lead. For example, does the message you received from a prospective buyer include many details about what specifically the buyer is looking for and why they are interested in buying a business? Does the lead mention if they are a first-time or experienced business-buyer? Is it thoughtfully written? In most cases, the more effort a prospective buyer puts into making contact, the more serious he or she is about buying. If the buyer sends a message that shows they have done some research instead of simply writing from the hip, it is a good sign that you can correspond with the buyer confidently.
In addition, once a potential buyer has made initial contact, you can ask them some simple questions to quickly gauge how serious they are about going through with a transaction. These types of questions include how long they have planned on buying a business, how they plan on financing the business and how much money they have available for a down payment. If the contact provides vague or unconvincing answers, you'll probably not want to invest too much time and effort into keeping the conversation going.
Step 3: Know What to Communicate
In some ways, buying an existing business is like buying a used car. If you've ever bought a used car, you probably asked the dealer why the previous owner sold the car in the first place. And then the car dealer probably told you that the previous owner was a little old lady who only drove it church and was recently placed in a nursing home.
Business buyers have a similar curiosity about the owner's decision to sell. Owners usually respond with an answer from the seller's playbook. Variations of "I'm ready to retire," "It's time to do something else," and "It's time to give someone else a chance" lead the pack.
Yet much of the time, the reason behind the owner's decision to sell is less important than when the owner decided to put the business on the market.
Ideally, the answer buyers should look for is that the listing didn't arise suddenly, but came as the result of a well-thought out, multi-year plan conceived by the owner as a means of achieving his personal and business goals. If that's true, the owner should be able to provide the buyer with a copy of the plan upon request.
But if the owner's decision to list the business happened quickly, that could be a red flag that the business is in trouble, that there are economic threats on the horizon, or that the owner hasn't taken the time to properly prepare due diligence materials.
More than anything else, buyers need to create opportunities to inject a dose of reality into the buying decision. Presumably, the person who is most qualified to offer a realistic perspective about the business and its future growth prospects is its owner. Yet sellers often prefer to paint a rosy portrait of the company rather than simply telling it like it is.
One of the ways a buyer can break through a reluctant seller's defenses is to invite the owner to make suggestions about how to increase capacity, market share and profitability. With the right approach, a buyer's appeal to owner expertise can change the seller's posture from defensive to collaborative.
Step 4: Keep Communication Flowing Through Purchase and Beyond
Now that you have found the perfect buyer, you'll have to continue effective communication through the purchase process and after.
After the business description and purchase price have been described, the purchase agreement typically deals with how the buyer intends to pay for the carwash. Most buyers cobble together a variety of payment methods to complete the sale, each of which needs to be clearly discussed and identified.
Buyers should look for a clear schedule of payments with escrow agreements attached to any payments that are due prior to final closing. If the seller is financing part of the purchase price, the repayment schedule should also be described along with collateral requirements and interest details. This can become a sticking point if the seller expects to secure a first collateral position for assets that will be held as security by other lenders.
When a business is sold, the seller makes certain promises to the buyer in the form of warranties. These warranties are an extension of due diligence for hidden threats or liabilities that would devalue the business or its assets. Since the majority of buyers aren't aware of the issues that are covered in a standard warranty, it never hurts to have an attorney give the warranty section a little closer scrutiny.
Sellers also have several responsibilities that need to be taken care of before final closing, most of which relate to business operations prior to closing. Buyers want written assurances that the business they are agreeing to buy today is the business they end up with when everything is said and done. However, clauses giving the buyer continued access to company records prior to closing can easily be overlooked, creating a scenario where the buyer is not able to track the company's status until the final documents have been signed.