You may be encouraged by the sheer number of potential buyers responding to your business-for-sale ad, but surprisingly, the majority of ad respondents never make a purchase. That’s why it’s important to distinguish the window shoppers from qualified buyers you feel comfortable entrusting with your business.
Finding the Right Buyer
People respond to business-for-sale ads for a number of different reasons ranging from simple curiosity to competitors doing reconnaissance. Some may respond to your ad honestly wanting to purchase your business when, 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 in the case of 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
You’ll need to establish a set of criteria for screening ad respondents in order to sort through them. Decide what you require from a potential buyer in terms of their business experience, the amount of cash you’ll 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 your sale, set perimeters for the type and amount of collateral required for your loan.
Narrowing Down the Prospects
Ideally, either you’ve set up your ad to require respondents to provide information about themselves including: why they’re interested in your business, their financial resources, timeframe, and experience, or your broker has collected this information for you. Using the information that you’ve collected on prospective buyers, 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 meet your seller-financed loan qualifications?)
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 copies 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 an NDA prior to disclosing any sensitive information about your business.
Release Information About Your Business in Stages While Maintaining Confidentiality
Once you’ve found a buyer who seems to fit your criteria, don’t hesitate to move into action. Give him or her a call, but don’t reveal the identity of your business at this point. As you chat, establish rapport through an exchange of information in which you learn more about the buyer’s qualifications as he or she learns more about your business and what you require in order for the sale to go through.
If the buyer seems viable to you, send him a copy of your selling memo summary sans any information that could identify your business.
Next, schedule an offsite meeting, ideally in your accountant or attorney’s office to sign a mutual confidentiality agreement. Welcome the buyer’s accountant or attorney to join you at the meeting. If it’s not feasible to meet in person, exchange confidentiality agreements, then schedule a phone meeting with the buyer and your broker, accountant or attorney.
Having an organized method 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 it comes time to make a final selection for a 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.
Next Step: Connect with a Business Broker
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