How to screen potential buyers

You’ve invested potentially thousands of hours, and a whole lot of energy and love into your business. You want to pass it onto a capable buyer with the right funds and skills.

Someone who’ll do your business proud.

Just like buyers want trust and honesty from you, you probably want to know you can trust the buyer you’re dealing with. To do that, you’ll want to get a feel for who they are, and determine if they are a good fit for the business. That means building a relationship with them.

Before you get too invested, however, you’ll want to know they’re the ‘real deal’…that they really have the skills, finances, and character to continue your good work.

Identifying the tyre-kickers from the serious buyers will mean you can find someone that ticks all your boxes. Let’s get started…

Decide what’s important to you

Your ideal buyer will look different to someone else’s. In order to find someone you’d want to sell to, you need to work out what you’re looking for. There are no hard and fast rules, but here are some key factors to consider:

• The bottom line – decide roughly what your price limit is (ie the lowest price you’re willing to sell for). This isn’t so much about personality as financials. If you’ve valued your business and you’re confident you know what it’s worth, there’s little point negotiating with a buyer who doesn’t have adequate funding. That’s why you should discuss funding early on. Ask to see written proof like a bank pre-approval, or cash/assets that will cover the purchase price. That way you’ll know you’re dealing with someone who can afford your business.
• Are you open to different sales options (like earnouts?) – an earnout provision means you get a share of future profits if the buyer can’t (or won’t) meet your initial asking price. If you’ve found a really good buyer, but they can’t meet your asking price, are you willing to work with them to come to an alternative arrangement? If so, what are your conditions?
  Prospects of success – if you’re looking for someone who’ll do a fantastic job with your business, over someone with enough funds to meet your asking price, weigh this up before you start your initial conversations with buyers.
• Business continuity – to what extent are you willing to stay on and help the buyer get a handle on the business, ensuring your suppliers, staff, and existing business arrangements are looked after and transitioned? If you’re hoping for a prompt handover, you’ll need to ensure your buyer has the skills and experience to hit the ground running.
• Growth prospects – do you want the new owner to grow the business? If so, the buyer will need the acumen, experience, and drive to make it happen.
• The right fit – if you’ve spent years creating a loyal team and a good culture, it’s reasonable to hope that will continue after you’re gone. For this reason, ask yourself how important it is for the buyer to fit within the team and culture you’re leaving behind.

Do some background research

Get the magnifying glass out, and put your detective hat on! To get a feel for the person you’re dealing with, it makes sense to check their experience and references, after all they’ll be doing the same to you. Spending some time investigating who a buyer is will help you gauge whether they’re genuine, or if they’re likely to waste your time.

Here’s how you can do some easy initial background work:

• Check social media – LinkedIn is a good place to look, as it often verifies professional credentials. Start by checking if their stated experience or skills match their profile (if they have one). Other social media profiles, if publicly accessible, may also help you confirm they’re a good fit.
• Ask for their resumé – though you’re not hiring them for a job, a resumé is a great way to see who you’re dealing with at a glance. Ask them to send a copy so you can check their credentials.
• Do a drop-in – if they’re a business owner already, consider discreetly checking out their current business as a customer. It’ll give you a good gauge as to how they run a business, and how they might run yours.
• Ask for references – if they’re not listed in the resumé, ask for a reference…and make sure you follow through with a phone call! It will give you a different perspective on who the enquirer is, and what makes them tick.
• Give them a call – ring them for a quick initial chat to get a first impression, and ask why they’re interested in your business. It’s faster than email, and you can more quickly get a feel for the type of person they are. It’s also a good opportunity to check if they align with any prerequisites you have on experience, finances, and personality fit.

Get to know your buyer

Time to dig a little deeper! If a potential buyer checks out after your initial research and enquiries, the next step is to learn a bit more about them. The sales process can be time and energy consuming, so now’s your chance to figure out for sure if they’re worth the investment.

At this point, you’re looking to build a rapport – the building blocks of a business relationship. You’re also learning more about them as a person, and whether they’re a good fit.

Here’s what you can do:

• Be clear from the start – tell your buyer what you’re looking for, what you want from them, and what information you’re willing to share at what stage of the process. It’ll help build your relationship, but you’ll also discover how interested they really are. Will they happily work with you during the sometimes-slow sales process, or are they just a curious enquirer who’s going to pull out when things get serious?
• Meet them face-to-face – you’ll get a much clearer read on someone when you meet them in person. It’s much harder for them to hide information or be untruthful if you’re sitting right in front of them. This is a great chance to ask them frank questions about how serious they are, their credentials, and proof they have the funds to follow through on their interest.
• Find out who they are – don’t be afraid to do a pseudo-interview with the buyer. As well as their hobbies and interests, find out how much they know about your business, the industry you’re in, and about running a business in general. Ask how they’d react in certain situations to get a feel for how they’d run the business if they took over.

Finding the right buyer can be a time-consuming process. And we know your time is precious. You owe it to yourself to make sure you don’t waste it dealing with buyers who aren’t suitable.

If you’re clear with what you want, and can quickly get a read on the person you’re dealing with, you’ll minimise wasted time…and hopefully, find the right buyer with a minimum amount of fuss. Anything you can do to weed out window-shoppers will help you get one step closer to “sold”.