Sellers of Businesses Should Deal With Serious Buyers
Business sellers should not have to deal with buyers who are not serious about buying their business. A key benefit of being represented by a business broker is not having to waste time, energy, and expense on meeting and dealing with buyers who are unqualified or not serious. Let’s explore what critical characteristics make a buyer worthy of being presented to a seller as a serious buyer.
Buyer Must Be Qualified By Business Broker
The first step that every potential buyer of a business must take is to be qualified by the business broker. The qualification process entails thoroughly completing and signing the Non-Disclosure Agreement (NDA). The NDA serves to protect the seller’s confidentiality and specifically prevents the buyer from damaging the business by communicating with the seller’s employees, customers, suppliers, or competitors. Additionally, the qualification process involves the buyer disclosing their available liquid funds. If the buyer does not have sufficient liquid funds, then they generally must have a pre-approval letter from a bank for external financing purposes. It is of paramount importance that a buyer demonstrate sufficient legal and financial capability to purchase the business before being introduced to the seller.
Out of State Buyers
- Unless the business is online or relocatable, the buyer must be local or in the process of moving close enough to the business so that they can operate the business.
- A serious buyer should generally be familiar with the local area in which the business is located.
- If the business being sold is in the retail industry (making location a critical component of the sale), then the buyer should be especially aware of the local area.
- For buyers that are living out of state or out of country (E2 Visa buyers for example), then they must have taken some tangible steps to relocate close to the business (such as finding a place to live locally and giving a definitive timeline of their move).
- An out of state or overseas buyer without a clear path forward of living close enough to the business is not a serious buyer.
- Moreover, some businesses such as restaurants cannot realistically be purchased without the buyer physically touring the restaurant and its immediate geographic vicinity.
Serious Buyers Should Have Industry Knowledge
A buyer who is lacking knowledge of industry norms, jargon, or background has a very long hill to climb in order to be taken seriously as a buyer. At minimum, such buyers should demonstrate that they have educated themselves about the industry and have done their homework about the business being sold. Sellers do not want their time wasted, so buyers should be prepared to intelligently discuss the business and industry prior to any meeting.
Example in the Healthcare Industry
- For example, a buyer for a home healthcare company in Florida should have some knowledge of the regulatory environment and appropriate licenses and transfer process necessary to purchase and operate a healthcare company in Florida.
- This includes defining the correct legal entity of the home healthcare company (either a nurse registry or a home health agency) and understanding the timeline and requirements of transferring the license via the Agency for Health Care Administration (AHCA).
- Without the buyer researching or understanding whether and how a successful transaction can even take place, the buyer will lose all credibility and should not be taken seriously.
Buyer Should Have A Sense of Urgency About Buying A Business
A business buyer should be taken seriously only if they have a true and legitimate desire to buy the business. Gauging the legitimacy of the buyer is fairly straightforward as the business broker may objectively determine whether the buyer completes and signs the NDA, qualifies financially, has industry experience, and lives close enough to the business. After the buyer’s legitimacy and qualifications have been established, the buyer should also demonstrate a sense of urgency in order to be ultimately viewed as being serious by the seller.
Factors Establishing A Buyer’s Sense of Urgency About Buying A Business
- A buyer who waits too long before returning an email, scheduling a meeting, or conducting preliminary due diligence does not have a sense of urgency about buying the business.
- Perhaps such a buyer simply has other matters occupying their attention and will circle back to their purchasing decision.
- Sometimes this kind of buyer does indeed lead to a successful sale, but normally they are simply not motivated enough to devote the energy and resources needed to go through the multiple steps necessary of buying a business.
- On the other hand, a serious buyer has done their preliminary due diligence, asks pertinent follow up questions, promptly requests to meet with the seller, prepares for the meeting, and actively demonstrates steps being taken toward making an offer and moving forward with the transaction.
- Additionally, some buyers may have a sense of urgency requiring them to buy a business within a specific timeframe for an external reason (such as E2 Visa buyers who wish to gain U.S. residency).
Sellers should not be burdened with buyers who are not qualified or who are not serious about buying their business. Use the right professional business broker to steer you toward the serious buyers that will result in a successful transaction.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a FREE evaluation of your business.