On Deal Talk, we often hear from former business owners who have sold their companies or professionals who are dedicated to helping entrepreneurs sell their...
How to Sell a Business: Screen Buyers
The Secret to Screening
The secret to quickly prescreening buyers
Read this over ten times. This one point alone will save you dozens of hours with unqualified buyers. We have discovered one tiny little secret that will save you countless hours prescreening buyers.
Step-by-step guide in screening buyers:
- Receive a buyer inquiry.
- Respond to the buyer inquiry via email.
- Send the buyer a brief summary of your business (1-3 brief paragraphs) in the email along with an NDA for the buyer to sign.
What to include in the NDA
Keep the NDA simple. It should be 1-2 pages. Include three simple questions:
- How much liquid cash do you have to invest in the business?
- What is your approximate net worth?
- What is your approximate credit score?
This process literally works like magic. Buyers who believe they are not qualified will typically put “N/A” or leave these prescreening questions blank. Some buyers may even put that they only have $5,000 liquid cash on a business with an asking price of $200,000. Unfortunately, many buyers think they can obtain a bank loan to purchase the business and think they may be qualified.
There is no point in asking the buyer dozens of prescreening questions. Just ask them the most important questions. You should only be prescreening them financially at this point.
If your landlord or franchisor requires a buyer with a certain credit score and net worth, then you may also want to include these questions as well because this is objective and can be done quickly. You can screen buyers more thoroughly later on in the process. If you screen buyers too heavily early in the process, then you will risk losing qualified buyers.
Weeding out buyers who are unlikely to buy a business – Another thing this method does is weed out buyers who have not looked at any other businesses for sale. Buyers rarely buy the first business they look at so it may be prudent to weed out these buyers. Nearly all experienced buyers know that they must sign an NDA before they can get any additional information on a business for sale. Experienced buyers will respond to your email by quickly signing and returning your NDA. These are the buyers you want to deal with. It also demonstrates that the buyer is cooperative and is willing to respect the confidentiality.
Why not to explain what an NDA is and why it is required in your screening email – The buyers we want to deal with already know what an NDA is and why it is required. Inexperienced buyers will often ask why it is required and try to avoid signing it – we simply move on to the next buyer.