| Dealing with inquiries from prospective buyers:
It requires a process of step-selling to close the sale of a business. The object of placing advertising, giving information to prospective Buyers, and answering Buyers’ questions is not to sell the business, it is to get the Buyer to move to the next step in the process.
Limit the information you provide in advertising or direct contact until you have qualified the prospect. For example, a business might be presented in advertising as an Established and profitable landscaping business with sales of $350,000 and discretionary cash flow of $75,000. Key employee will continue working in the business. The potential Buyer will indicate an interest, but will need additional information about the business and the Owner wants to protect the confidentiality of that information and the further discussions that may develop.
The Seller begins the process with the main objective of getting information about the Buyer to determine if he is a serious prospect. The most important qualification is to determine if the prospect is financially capable of making the purchase before you give out sensitive information or waste too much of your time.
A meeting is arranged (usually away from the business) where the Seller will obtain a formal written Buyer Financial Disclosure and a signed Confidentiality Agreement. Additional information about the Buyer may be collected as the process unfolds. Buyers should understand that they, too, must build credibility.
Then the seller can identify the business and release basic summary information. This is sometimes referred to as a Selling Prospectus (maximum two pages).
At this point the Seller will evaluate the Buyers interest and proceed to make plans to provide the more detailed information that is needed to advance the sale.
Always work to create the impression that there is interest from other parties. This should be done in an indirect way without making false statements. It is often what you do not say that can create this perception. It is obviously advantageous for you if the potential Buyer thinks he must offer a price that is higher than the competition.
Beware of tire-kickers or those who will not provide financial information or who are unwilling to openly discuss their criteria and processes in making a decision to buy a business.
Serious prospects who are qualified and who have signed a Confidentiality Agreement should be given the Company Offering Package.
Remember, you should do all you can to maintain confidentiality of the sale:
- Use general terms to advertise your business
- Obtain a signed Confidentiality Agreement from any inquirer
- Develop a strategy to deal with first contact of a prospective Buyer
- Consider using a third party as a first contact to obtain the Confidentiality Agreement and pre-qualify the Buyer
Goals of Seller:
To obtain qualified and motivated potential Buyers.
To have signed Confidentiality Agreement from Buyer.
To have signed Financial Disclosure from Buyer.
To provide Buyer with preliminary information to make a decision to proceed. (Qualifying Business Buyers)
Page 2 of 2 | <<Previous
|
