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Qualifying the Best Buyers for Your Business Sale

Last Updated
September 22, 2010

5d) Qualifying Buyers

When people respond to your advert, many of the prospects will be time wasters i.e. those people that are not entirely serious about buying a business. Consequently, by failing to recognize these people, you could hand out information (Selling a Business) to unwelcome parties, say, competitors, that may use this information against you (affecting your confidentiality).

If using a business broker, it will be their job to qualify buyers saving you many uncertainties in your decisions, possibly due to your lack of experience.

Meet up with the prospects so that you can make a more confident decision on qualifying them as a potential buyer. Similar to a due-diligence period, it is your turn first to research them, as they will be doing with your business later on.

So how can you distinguish the qualified buyers? For starters, do they have the finance to buy your business? If they are suggesting that the money will come from an unreliable source, like their so-called ‘rich’ Uncle, then they probably do not have the finance at all.

Can they prove where the money is coming from? If you got a response of a good financial plan, then they may be a good prospect, but you should still obtain proof that the finance can be obtained. Obtain a Credit Reports & Analysis, company report (if it is a current busines s owner), financial statement, or a Credit Policy Standards & Assessment if you feel necessary. Also important, are they capable of running a business? What is their previous experience ? Ask the prospect to compile a resume so that you can review how suitable they are for running your business. Determine why the prospect wants to buy your business. Remember, at this stage, the only information they have is the information you presented on the advert or the information given out by the business broker, so their response could be restricted. If at any time you feel uncomfortable with the prospect, end it straight away: you will be liaising with them for quite some time if you qualify them as a serious buyer. You may feel uneasy asking personal questions but those prospects that reply with confidence are often those that will proof qualified: they expect sellers to ask these questions and will respect you for it. Remember, it will be their turn to ask the questions later on.

5e) Who are the Best Buyers?

When qualifying buyers, you should look out for the following as they are often the best prospects for buying your business:

  • Those that are looking for acquisitions for their existing business
  • People who have been in employment for some time and are aiming to run their own business. At the same time, they should have the financial backing to do so
  • Investors- aiming to hire other people to run the business for them

If any competitors show interest, you could see them as someone trying to expand their business. This can be dangerous as they may just be there to lap up the information you are giving out to use for their advantage. Consequently, you should consider your other prospects before accepting them as a qualified buyer. Remember, they will not know that it is your business (if you have kept confidentiality), but by the brief descriptions you have given, they may have put two and two together. Once you have made your decision on who is a qualified buyer and who is not, you should inform those that you consider time wasters that you are not prepared to take their interest any further.

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