There are many moving parts when it comes to selling a business. One of the most time consuming and frustrating aspects of selling is finding the right buyer. When business owners try to sell their business independently, the buyer qualification process often takes up an unreasonable amount of time and rarely results in a qualified buyer that makes an offer. Without the proper safeguards in place, like a buyer screening process and a confidentiality agreement, businesses inadvertently give away important information that can ultimately hurt the sale of the business. Dreamers, undercover competitors, and tire kickers can take up an owner’s time. As business owners get ready to sell, here are 6 potential buyers to avoid.
1. Buyers who do not have liquid cash available to make a purchase
The expression “cash is king” is especially true when it comes to selling a business. An unprepared buyer will often be hesitant to disclose how much money they have available and may not even have the credit required to finance the purchase. Look for buyers who have documentation available showing exactly how they will finance their purchase.
2. Buyers who are evasive or dishonest
In a business for sale transaction, both the buyer and seller need to come to the table prepared for open and honest communication. If a potential buyer is being evasive or outright dishonest, it is a red flag that should be taken seriously. It is highly unlikely that a dishonest buyer will eventually make a reasonable offer on the business. These buyers might be competitors or new business owners looking for information.
3. Buyers who expect too much information too soon
Some buyers expect that their verbal expression of interest entitles them to all the information about a business such as financial records, customer information, or vendors. Releasing this information before a buyer has been properly qualified can have disastrous results. The potential buyer may contact customers or vendors who are not even aware the business is for sale, and this can irreparably damage relationships and trust. It is absolutely fine to walk away from a buyer who pushes for this information without being willing to complete a proper qualification process.
4. Buyers who are risk averse
Some buyers are looking for a no-risk business investment and these buyers are unlikely to make an offer. While some risk can be mitigated, it is impossible to eliminate it completely. Buyers looking for a risk-free opportunity will always find a reason to pass on making an offer. A buyer who is willing to accept some amount of risk and has a proactive plan in place for managing and responding to risk is more likely to make an offer and be able to handle the stress of running a business.
5. Buyers who do not have the necessary skills, experience, or expertise
A Buyer who has no demonstrable skills, experience, or expertise will not be successful in buying or running a business. It is usually preferred that a buyer has relevant industry related experience, but well-matched transferrable skills from another industry can also help a buyer be successful. If a buyer approaches a business without a skill set that is relevant to the business, they will not be a good fit. If they do not have required licenses or certifications, they will not be able to run the business.
6. Buyers who do not want to be actively involved in the business
The reality is that most small businesses valued at under $1 M have owner-operators that work in the business full time. These businesses do not make enough money to pay the owner and pay a salary to a full-time manager. Buyers that want a business that does not require their active involvement are most often looking for mid-level companies at an entry-level budget.
Acuity Business Group has a well-refined and tested buyer qualification process that helps business owners save a great deal of time by only introducing them to qualified buyers who are ready to make an offer. By the time we introduce a buyer to the seller, they have already proven they are financially able to purchase the business, are ready to make an offer, and have a plan in place for assuming ownership of the business. By taking the time to qualify buyers properly, Acuity Business Group maintains the highest level of confidentiality possible and ensures that the seller’s time is not wasted by meeting the wrong buyers. If you are ready to sell your business, contact us to learn more about how our buyer qualification process will help!