Characteristics of a Serious Business Buyer
Selling a business is very complicated transaction, and there are far more complexities involved with a transaction like this than something like residential property, for example. For business sellers, the process requires a lot of patience as you prepare for the sale and deal with prospective buyers.
Few things try the patience of business owners more than unserious buyers. No one likes to waste their time dealing with “tire kickers” who have no real intention or ability to purchase the business. It is beneficial for sellers to weed out unqualified buyers, so that they can focus their valuable time and energy on serious prospects.
There are a number of characteristics that define a serious buyer, here are some of the most important:
Business History: One characteristic of a serious buyer is that the prospect is a current business owner or has owned a business in the past. Having prior business ownership experience means that the person will already have a good idea of what it takes to make a business work. In addition, the fact that they have owned a business before makes them more likely to move forward with a new business purchase.
The Right Skillset: Being a prior business owner is one strong characteristic to look for, and other closely related qualities include the prospect’s education, work history, and skillset. Does the person have experience working in the same industry? Have they held positions where they have performed the same or similar work to what would be required to operate your business? Required licensing and certifications might also be applicable to this question; for example, if you are selling an accounting practice, a licensed CPA would be far more likely to be a serious buyer than someone who is not licensed in the field.
Access to Capital: A serious buyer will be able to come up with a substantial down payment and have a solid plan for how to finance the rest of the purchase. During the screening process, the prospect should be required to submit a personal financial statement showing their assets and liabilities to help determine whether or not they are qualified. Many buyers will want the owner to finance at least a portion of the purchase, but if you entertain this option, you should only do so with someone who is willing to put a significant amount of their own capital at risk.
A Good Understanding of the Business Acquisition Process: Unserious buyers often display a lack of general understanding of the business sales process and what it will take to successfully operate the company once they become the new owner. One of the best ways to tell the difference between a casual and serious buyer is the type of questions they ask. Serious buyers will understand due diligence, and they will usually have a list of detailed questions about your specific business and the industry as a whole. They will want to know the reason you are selling, the major challenges your business faces, sales history and trends, future growth projections, competition, pending litigation and other potential legal issues, etc.
Displays a Passion for the Business/Industry: What is the prospect’s level of enthusiasm regarding the business and industry? Do they seem passionate about doing this type of work? You can often tell by how interested and engaged they seem when you are answering their questions. If they seem half-hearted and as if they are just going through the motions, then they might not be all that serious about purchasing your business.
The Benefits of Working with a Local Business Broker: Screening prospective buyers to find those who are qualified and serious about purchasing the business can be a difficult and time-consuming process in and of itself. And this is where it can be very beneficial for a seller to work with a reputable business broker.
Business brokers handle transactions like these on a regular basis, and they have tried and tested screening processes in place. Experienced brokers have also dealt with enough buyers to know the difference between those who are truly qualified and those who are just wasting your time. By working with a broker, you can minimize the amount of time spent dealing with tire kickers, so you can focus on more important tasks that need to be done as you prepare for the business sale.