Avoiding Unqualified Buyers

Once you recognize the type of buyer you’re dealing with and their behaviors and expectations, it’s time to dig deeper. Understanding more about your buyers will allow you to weed out the pretenders, thereby spending more time on serious buyers and less on the dreamers. Let’s look at some practical applications for assessing buyers. 

Motivation

A key part of your initial due diligence should be spent assessing the buyer’s motivations. How motivated do they appear to be? Do they quickly return your calls and emails? Are they eager to move forward, or are they overly critical of your business? 

A motivated buyer will eagerly jump through hoops. They’ll quickly return phone calls and emails. Despite any potential roadblocks, they’ll be keen to move forward. You don’t have to chase motivated buyers down – instead, they chase you down.

In 1964, Associate Supreme Court Justice Potter Stewart was asked to define hard-core pornography, to which he responded: “I shall not today attempt further to define the kinds of material I understand to be embraced … but I know it when I see it … ”

My response is the same when attempting to identify a motivated buyer – I know one when I see one. If you’re in doubt, it’s unlikely they’re truly serious about buying a business.

Why Buyers Disappear

Buyers can disappear for any number of reasons. Maybe their priorities unexpectedly changed. Maybe, as in the case of a corporate buyer, there was an internal shakeup and the person you were dealing with is “no longer with the company.” Maybe the economy – or their slice of the economy – took a nosedive, prompting a spending freeze or more caution going forward. Maybe they found a better deal.

Stuff happens.

The solution is simple – don’t get emotionally involved with any one buyer. This doesn’t mean you shouldn’t be aggressive about selling your business. You should be a go-getter, but keep a level head and focus on running your business during the process and remain emotionally detached from any specific buyer.

Another point is, don’t become too emotionally attached to the idea of selling. Many sellers seem overly eager to sell their company and spend far too much time and effort thinking about the process, so they end up neglecting their business in the short term. EBITDA often declines as a result, and the value of their business suffers. Keep the pedal to the metal up until the day of closing if you want to maximize the purchase price. 

Conclusion

Here are the key points to bear in mind as you screen potential buyers:

• Keep your cool and focus on running your business. 
• Prepare a simple plan to sell and execute it with precision. 
• Don’t become emotionally attached to the idea of selling your business or to any single buyer.

Screening potential buyers will help ensure you’re dealing with serious buyers who have the means and determination to follow through on the purchase, saving you time and money in the long run. Understanding the differences between various buyer groups will help you decide how to best approach marketing your business while also maintaining confidentiality.