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How to Eliminate Wasted Time with Unqualified Buyers
That title caught your attention, huh? Well unfortunately, there isn’t a magic genie that can tell when a buyer is serious about buying your business, but there are clues to look for that are almost as accurate.
So, how do I prevent myself from wasting time with buyers who are never going to buy a business?
The best way to do this is to prepare a detailed summary on your business, in either a PDF or in an audio interview with yourself and an interviewer. For information on preparing an audio interview, please contact me or request my article on how to prepare a Q&A interview on your business.
When the buyer initially contacts you, send them detailed information on the business. If the buyer is local, then politely request that they meet you at your business, so you can give them a tour and answer their questions.
This process very easily weeds out all the buyers that like to sit at home on the internet and dream about buying a business (There are tons of these buyers.). This is difficult to do unless you initially provide the buyer with information. It is a give-and-take process, so you should give the buyer detailed information and then request that they drive to your business to meet you.
Ok, so I meet the buyer; now, what should I do?
First of all, keep the meeting short – preferably less than an hour. Give the buyer some more information on your business if the meeting goes well. This can take the form of a Seller’s Disclosure Statement, a lease summary or financial information on your business.
Here is the magic part – after you give the buyer more information, hand them two very important pieces of paper. Give them a buyer profile and personal financial statement to complete. Casually and politely tell them that you would be happy to meet with them again and share more detailed information with them, but you also want to be comfortable with who you are dealing with. This requires a delicate explanation as some buyers may get offended that you are “prescreening” them. If you are offering seller financing, then you can explain that if you are to finance a portion of the sales price, you want to know the person and be comfortable with them. You could also explain that the landlord is very particular about who they choose as a tenant, and you want to ensure that they will qualify and you don’t want to waste their time.
Why are these documents important?
Again, most buyers who are not serious will not go to the trouble of completing a detailed buyer profile and personal financial statement. Yes, some will slip through the cracks, but this process ensures that you are dealing with a qualified party.
Also, by requesting the buyer to come back and visit again, you are giving the buyer time to think about it and he/she must schedule another time to come back and visit. Few buyers who are serious will actually go through the trouble.
So now, the magic buyers are left, right?
Unfortunately, no. I wish it was that easy. There is one buyer who will be left, who will never ever buy. That is the buyer whose goal is to buy the “perfect” business and wants to entirely mitigate risk. This buyer will never buy. This type of buyer is easy to spot, but difficult to describe. You know the buyer when you see them. They have been looking for a business for three years, and have looked at over 50 businesses for sale. They will initially seem extremely interested in your business and will request meeting after meeting only to find out, at the last minute, that there is an imperfection in your business.
There are two ways to handle a buyer like this:
- Challenge the buyer and educate him that there is no perfect business. Explain to the buyer that you thought the exact same thing before you bought the business. Talk openly about the buyer’s fear. Empathize with him and challenge him to pull the trigger.
- Don’t meet with the buyer more than three to four times unless he makes an offer on your business.
What is the number one piece of advice you would give me when dealing with buyers?
Simple, run your business as if you are never going to sell it. Never ever get hung up on one buyer. If you do that, then you will never be disappointed. It is very easy to get wrapped up with one buyer so much that you lose focus on the business, and the business starts to slide. Invest time in the buyer but try not to invest emotionally. Spend time with the buyer, give them what they need, treat them with respect, but stay focused on running the business up until closing.
I have been involved in buying and selling businesses for over ten years now, and I cannot tell you how many sellers I see that get so involved with a buyer that they lose their focus on the business; the buyer backs out, and the seller is left with a business that is worth 20-30% less than before they spoke with the buyer.
What about the “jerk” buyer from hell?
Tell him to go back to hell ,and if he calls you, you will call the police. Well, just kidding. Don’t waste your time with this type of buyer. They are a complete waste of time and will be a complete nightmare to deal with. Remember, the sale process is long and not easy, so you want someone that is flexible and realistic to work with, not just someone who will pay your price. These buyers usually end up trying to bargain for so much more than they initially agreed on, that most deals with the “buyer from hell” end up falling apart. They often threaten lawsuits, threaten to go to competitors, and more. Don’t waste your time with them, plain and simple. Find someone who is easier to work with and who seems flexible enough to get a deal done.
Remember, all deals require a lot of flexibility from both the buyer and seller. If you encounter a buyer who seems extremely rigid in his strategy, then you should probably move on.