Assessing a potential buyer for your business can be an absolute rabbit hole when it comes to wasting time, -your most valuable commodity as a business owner.
We recently asked our community for some tips on best practices for qualifying potential buyers, and below, you’ll see the preferred tactics our BizNexus Community Advisors and M&A professionals referenced as some of their reliable go-to strategies for managing this successfully at scale, -an artform not easily replicated.
Does the Buyer Provide you Information Upfront?
As part of the vetting process of first-time buyers, three administrative items are requested/required. 1) Up to date resume or curriculum vitae. 2) Personal financial statement, 3) a current credit report - secured by a potential buyer. Next, an in-depth conversation about their motivation to become an entrepreneur.
For first-time buyers who have the right attitude & awareness, additional due diligence on them is done to further evaluate their buyer worthiness.
George Scott @ Business Consulting Solutions, LLC
Show me, upfront, your money. Enough for the deal you intend. Prove, right now, that what you say you can do is true.
Ted Leverette @ Partner On-Call Network, LLC
Can The Buyer Provide You With Their Previous Experience?
Prior experience in deal-making or related business operations.
Vipin Singh @ Murphy Business Sales, LLC
For an individual buyer, they need to have prior experience in deal-making.
Yatin Thakore @ Technology Park
Interview them, assess background experience and get a loan pre-approval.
April Femrite @ True Real Estate Mankato
Does the Buyer Have a Funding Strategy?
As part of my initial conversation, I usually just ask them what their strategy is to fund the acquisition. If an individual investor can’t tell me then that is a red flag. If they are relying on the seller for too much financing, that’s also a red flag. As soon as they ask for tax returns, I ask them to complete a personal balance sheet. If they are PE or VC and say they have committed funds, they I tell them we will need to see the funds or know who the investors are before too long to see their reaction.
Joshua Meltzer @ Sunbelt Business Brokers of Boston & Providence
Join The Conversation In Our Community
We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.