Selling A Business
Ask These 5 Questions to Prequalify Potential Buyers in Florida
It’s easy to get caught up in the excitement of putting a deal together when you are approached by someone who’s interested in purchasing your business. Your thoughts can often run to how much you’re going to make on the deal, how your brand and your employees will be protected, and what you intend to do with your life after the deal has gone through.
But just because someone has expressed interest in purchasing your business does not mean he or she is actually qualified to buy it. Some people who express interest don’t have any real intentions of going through with a deal. Some may be testing the waters to see what’s out there. Some may be competitors looking to gain an advantage in the market. Others, still, may have real interest in a deal, but aren’t financially qualified.
That’s why it’s important you stay close to the vest and prequalify your buyers as best as you can before opening the hood to show them private information about your business.
In real estate, it’s easy for sellers to prequalify buyers. A mortgage company typically provides prequalification letters to buyers, who then show that to their real estate agent, who then show that to the sellers’ real estate agent before the buyer is even allowed to enter the home.
It’s not that simple when you’re selling a business, though, and there isn’t a pre-defined structure for doing so, like there is in real estate. But by asking the right questions, and knowing what information to get from potential buyers, you can make sure the information you give – and the time you spend – is for a buyer who is legitimate.
Here are five questions to ask that will help you prequalify potential buyers.
Question 1: What are the buyer’s intentions with your business?
Any buyer who is serious about purchasing your business will have an idea in mind about what they are going to do with your business once they own it. By asking this question, you’ll find out whether they fall into this category, or if they are just phishing for information.
Question 2: What is the buyer’s interest in your business?
Entrepreneurs are very passionate people, and they often have a deep moral reason for why they invest in what they do. Sure, some just like to make money, and potential buyers of your company might just see it as a profitable opportunity.
But most qualified buyers will at least express a passion for either what you do now, or what your industry does.
Question 3: What is the buyer’s experience in your industry?
Here’s another key component to figuring out whether someone is qualified to purchase your business. Do they have experience in your industry? While this isn’t a definitive elimination question if they don’t, you do want to make sure they have at least some related experience that would translate to your industry, or to running a business in general.
Not only will this give you a clue as to whether they are serious about purchasing your business, but it’ll also shed light on how the business might perform after you sell.
Question 4: Has the buyer run, purchased and/or sold a business before?
This is somewhat related to Question 3, but the answer to this question will give you some insight as to whether they are an experienced buyer, or whether they are brand new to the game.
How does this make them a qualified buyer or not? If they’ve bought (or sold) a business before, they know what goes into it, and are therefore more likely to understand what they’re getting into.
Question 5: Can the buyer afford to purchase your business, and can they prove it?
This is fundamentally the most important question to ask. However, it’s best not to lead with this question, so as to not come off as if the sale is all about money.
Ultimately, any person who expresses interest in purchasing your business needs to be able to prove to you they can afford to do so – before you open up your books to them. This should be a non-negotiable item, too.
Your business is the valuable item at stake. If they want to see what’s under the hood, they need to prove to you first, with verified financial records, that they can afford to close on the deal. If they can’t, or if they are unwilling to show you first, then you can rest assured they aren’t serious about purchasing your business.
By asking these five questions to any person who approaches you about purchasing your business, you’ll have a better sense of whether they are qualified to go through with the purchase, whether it’s worth taking the risk of exposing valuable company information to them, and whether it is worth your time and effort to explore a deal.
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your buying and selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing, Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222. View available Businesses for sale in South Florida.
