It is very important to identify a serious buyer who is qualified. You do not want to waste your time and energy trying to sell your business to someone who is not really planning to buy. How can you make these kinds of assessments about a buyer’s capability? In this article we will take a look at some signs that will help you figure out your buyer in advance.
Do they have a history of ownership?
If someone has owned a business in the past, then they have a firm understanding of what is involved. They are more likely to be a serious buyer. They are also more likely to move forward. You will also find that they usually have the ability to make a substantial down payment and financing options. Even if they want you to help them with financing, you should still be looking to ensure that they will put their own capital at risk as well.
Are they seeking information about your cash flow?
A serious buyer will want to make sure your business is profitable. They should be asking a lot of questions about your cash flow and also your inventory. If you have unusable inventory this could be of concern to a buyer. Disclose this information upfront, as it will likely be discovered in the due diligence process regardless.
Are they asking about the health of your staff?
A serious buyer will want a dedicated and reliable staff. It is a good sign that a buyer is serious if they are asking about salaries. These days many companies are suffering due to staffing issues. It is something that should be front and center in any serious buyer’s mind.
Do they have an interest in the industry?
Another good sign to identify a serious buyer, is if your prospective buyer is asking questions about the industry. A serious buyer will want to have detailed knowledge about the industry they are about to enter. If a buyer has experience in a given industry, it means they are more likely to go through with a purchase. If they lack experience in your industry, do they seem passionate about the industry? If they are not asking pointed questions, this might mean that they are wasting your time.
Are they asking about capital expenditures?
A prospective buyer will want to know how money is being spent. They will want to make sure that major expenses have already been paid off. The prospective buyer will ant to make sure they will not be caught off guard by large pending purchases.
Do you have professional assistance?
The more in-depth questions a buyer is asking, the more serious they are likely to be. Your M&A advisor’s job is to screen prospective buyers. EBIT Associates has years of experience to help you identify a serious buyer. We know the warning signs that pop up when buyers profess to be interested, but are not likely to go through with the sale.
When trying to sell your business, it is critical that you focus your time wisely. We at EBIT will help ensure that you do not waste time working with people who are just kicking the tires.