Determine whether a prospective buyer has the willingness and ability to acquire your business before releasing the name and location of your business, and before disclosing any confidential details.
Objective
Screen and qualify each inquiry as to their affiliation, size, timing, and financial capability, so you don’t waste time and money engaging with people who will never buy your business.
Tasks
Research each prospect’s background and experience. Obtain a profile on them and their business, including a personal or business financial statement. Verify they are serious and qualified to buy your business.
Best Practices
One of the annoyances of selling a business is having to field inquiries from tire kickers, lookie-loos, and people simply trying to collect competitive intelligence on you and your business. You can waste a lot of time if you don’t know how to spot them and reject them quickly, so you can devote the appropriate time and resources on engaging with serious and qualified buyers. This is where a good business broker starts to earn his fee, if you don’t have the time to do it.
Lots of people dream about buying a business. Most don’t have the capability. Some go through the motions hoping the seller will extend them credit and finance the entire sale. Other people misrepresent their true intentions when inquiring about your business after seeing it on the BLS.
They may be MBA students who have been assigned a project by the professor to break down the merits of a business. They may be competitors fishing for competitive intelligence. They may be investors or analysts who are compiling data on your industry or market. They may be business brokers, financial advisors or insurance agents trolling for business. They are NOT buyers!
Buyer qualification typically takes place AFTER a prospect has signed the NDA. They have inquired and expressed interest in learning about your opportunity. It’s now up to you to verify they are the real deal before engaging with them and sending them confidential details. Here are some best practices:
- Upon receiving an inquiry from the BLS (Step 6), or a positive response from your outbound prospecting (Step 7), send the inquirer your Teaser (Step 3) and NDA (Step 5). Politely ask them to sign and return the NDA and to attach a profile of themselves or their company — and proof of financial capability.
This will likely deter the lookie loos and you won’t hear back from them. Others may not return the NDA and reply they simply want some basic info before executing an NDA. It’s up to you to engage or not, but this usually indicates they are fishing. Your Teaser should have given them the basics they need to determine if your business is a match with their criteria and capability. My advice is not waste time on anyone who won’t sign the NDA.
- When they return the NDA, make sure they have provided their name, title, business name (if inquiring on behalf of a business), their full address, their phone number, their driver’s license number (if an individual), or their Employee Identification Number (EIN) (if a company). Make sure they have signed the
In my experience, many people will return the NDA with most of the blanks empty except for a messy signature that is impossible to read. They will NOT attach a profile or financial statement. This is a tip off that they may not be a serious prospect. Politely return the NDA and ask for them to resubmit with all the blanks completed legibly. Ask them again for a profile or link to their profile on LinkedIn or a website, and a financial statement or letter of credit. Attach a blank financial statement and invite them to complete and submit the form. (See sample in the back of this book).
This will chase away most inquirers who are not serious or qualified. Congratulations, you just saved yourself a ton of time and aggravation! Nothing derails a selling effort faster than thrashing around with self-purported buyers who will never buy your business.
- Upon receiving a completed and signed NDA, along with a buyer profile and statement of financial capability, verify the information they submitted by performing a Google is your friend. You should be able to quickly verify they are who they say they are and likely have the capability to buy your business. Some may require loan approval or seller financing. That’s fine, as long as they have the down payment and are credit worthy, it’s worth engaging with them.
Upon satisfying yourself that they are a capable and qualified buyer, immediately counter-sign and return the NDA along with your Selling Memorandum (Step 4). In some cases, you might want to return the counter-signed NDA and ask for a 15-minute call to further qualify their interest BEFORE sending them your Selling Memorandum. If you do decide to send the Selling Memorandum immediately, ask them when you can schedule a call to answer their questions after they have had time to review it.
All that prep work you did in Steps 1-7 will now pay-off handsomely. You are ready to engage with a serious and qualified buyer!
Tools and Tips
To facilitate a prospect signing your NDA, use Docusign, Adobe Sign, or other electronic means of electronic transmission and signature. These are legally binding documents. It’s usually easier for a prospect to sign and return electronically, than having to print out your NDA, sign it, scan it, and email it back to you.
When you receive a signed NDA, it’s always a good idea to call the phone number the prospect provided. Is it a personal residence, a business, or a mobile phone? Does anyone answer? Do they return your call after leaving a message?
The purpose of your call is NOT to disclose the name and location of your business, or any details whatsoever, other than to verify information they provided and have them clarify their interest in buying a business like yours. You are qualifying them at this stage; they are not qualifying you.
Remember, the NDA is NOT valid until you have verified the information supplied is correct and you have counter- signed it and returned it. Never send an NDA to a prospect already signed by you. Have them sign it first.
Summary
Buyer qualification is the practice of verifying a person or company has a genuine interest in acquiring a business like yours AND has the capability to do so. It’s important you do not waste time on people who have no genuine interest, or no capability to buy any business – no less your business. It’s easy to be seduced by a prospect’s enthusiasm and flattery for your opportunity. Keep your eye on the prize: Selling to a person or company who can and will make the acquisition.
Examples
- Sample Email for Inquirers to Sign and Return Your NDA
- Personal Financial Statement