How to Vet Business Buyers

How to Vet Business Buyers
  • Opening Intro -

    You’ve decided to sell your business and are entertaining offers.

    One potential buyer is standing out among the rest, therefore you are seriously considering striking a deal with her.

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Before you move ahead, keep in mind the following points. In doing so you can avoid much grief later.

1. Perform a background check.
How well do you know this individual? What is her character like? A perfunctory review of her background may not be enough. You should run a credit check, ask for references and find out what this person’s reputation is in the business community. Having a better understanding of the buyer will help you know if this person is someone you want to do business with.

2. Understand fair market value.
Your business broker has valued your enterprise. Your buyer has come in with her own valuation, but it is substantially below the broker’s estimate. She may be basing her value solely on what the business has generated over the past three or four years. Your business has been on the upswing and is expected to generate more money for the owner, not less. Never settle for anything less than a fair market value for your business.

3. Consider financing options.
Will the buyer finance the business on her own or will you be holding the note? How much of a down payment will you accept? You are taking a financial risk by selling, a risk that should be shared with the buyer. Make sure the buyer has a vested interest in the business or you could be left holding the losses if it fails.

4. Hand off to your attorney.
Your attorney should review the contract as soon as an offer is received and tentatively accepted by you. You may have been dealing with your attorney all along, but now the buyer’s attorney is involved. You want to protect yourself legally and financially when you sell your business. Have your attorney scrutinize the sale agreement and only move forward with his blessing.

5. Implement a transition plan.
Selling a business takes time. What also takes time is making a transition from owner to owner. That transition may involve many things, including your direct assistance for several weeks or months as the new owner takes over. Sure, you want to exit your business, but you also want it to succeed. Stay involved as long as you and the new owner believe is sufficient. When you’re done, move on.

6. Protect your good name.
Selling out means you’re no longer involved with the business. Nevertheless, you may have built the business from scratch and have built your reputation with it. Even as the business changes hands, your loyal clients will understand that you were the one who launched it. You should not only want the business to succeed, but that it carry on its stellar reputation, what can still reflect your good name.

Seller Considerations

There are other points to consider when selling your business. In the event that things go wrong, are there strategies in place for the new owner to fall back on? Your business broker can help you with that.

Lastly, there is a question you should ask yourself and it is this one: do you really want to sell your business? You may think that you want out, but you’re not ready to pull the plug. Be honest with yourself — you need to have sufficient resources on hand after the sale is concluded and have something to do with your life. When the deal is done you’ll be left with your business past behind you and a future of possibilities in front of you.

See AlsoSelling Out: How to Get the Most for Your Business

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Categories: Business Brokerage

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