How To Qualify a Buyer For Your Business

Most business owners think that the only role that business brokers perform is that of finding a buyer for their company.  The reality is that although a business broker must certainly scope out a buyer the real work comes in qualifying the prospective purchaser.  Selling a business is a very involved process so experienced business brokers should be able to tell you, the business seller, how they would go about qualifying any interested party that inquires.

Qualifying a buyer is extremely important.  There is the time issue that must be preserved – the seller’s and the broker’s.  An active business listing may have 50 or more interested people calling but the vast majority are not qualified to buy the business.  So, in order to pick out those people that are truly willing and able to buy a business is critical in the process of how to sell a business.  Below are some ways in which a business broker might qualify a prospective buyer.

Sign an NDA
The first thing a good business brokerage should do is require all inquires to submit a formal non-disclosure agreement.  This is important to preserves confidentiality but it also serves as a first hurdle to overcome the window shoppers.  The reasoning is that some people may simply send an email or call a business broker via telephone but it is that extra effort required to fill out an NDA, have it witnessed and fax it in that discourages those people that really aren’t interested to begin with.

Experience in the business
Some businesses for sale require a depth of experience that is a precursor to success in the industry.  For instance, an auto repair shop or a business that requires a trade specification.  A business brokerage must determine if the buyer has the experience required to properly operate the company.

Financial resources
If a person has the experience to run the organization, the professional business broker must then determine if they have the capital required to actually buy it.  It must be determined early in the process if a buyer has the liquid cash on hand plus the appropriate access to credit that is needed to consummate the transaction.  Many people think that a business can be purchased with as little as 5% as a down payment, but this is simply not true.  A buyer may be even asked to submit a personal net worth statement for some inquiries.

How serious is the buyer
A prospective buyer may have the cash and skill needed to buy and run the business but the final piece of the puzzle is if they have the determination to actually complete the deal.  A business broker must find out if the person has the stamina to go through the buying process and is willing to take the entrepreneurial leap.  Buying a business can be an arduous process so it’s important to qualify the potential investor very early on this variable.

If you are contemplating selling your business please consult with an experienced business brokerage that has the experience needed to find a buyer and properly qualify them for you.