Selling Your Small Business? How to Spot These Buyer Warning Signs
Selling your business involves making your company look good to potential buyers. Unfortunately, however, not all buyers are qualified. If you miss key red flags, you could end up wasting time with someone who ultimately will not buy your company.
Whether you’re preparing for a sale or your business is already on the market, it’s important to know how to protect yourself from unqualified buyers.
Key Buyer Red Flags
You may already have a sense of how to identify potential buyers for your business. But what about when a buyer comes to you? Whenever you make contact with someone interested in buying your company, look for these common signs that they could be unqualified.
Poor Communication
Does your interested buyer take days to get back to you? Do they often reschedule meetings? Or do you always end up talking to an intermediary instead of a decision-maker?
These are all signs that the buyer may not be serious enough to proceed with the sale. And even if their intentions are sincere, they might be too disorganized to follow through.
Lack of Understanding of the Industry
When selling your business, it’s better to hand it off to someone who understands how the industry works and has a clear vision for your company’s future. A potential buyer with no relevant experience deserves closer scrutiny. If they haven’t taken the time to learn about the industry, it’s probably wise to sell to someone else.
Problems With Financial Qualifications
Even if a potential buyer sounds credible, you should still verify their financial soundness early on. A buyer might be enthusiastic about buying your company but become hesitant when asked for financial documentation. This is a sign that the purchase could fall through.
Some buyers know that their finances are shaky, but they’re hoping to find a workaround. It’s not uncommon for buyers to ask for seller financing for part of the purchase price. However, if the buyer wants you to finance the entire purchase, they likely aren’t ready to buy.
How to Vet Buyers Effectively
Taking time to screen potential buyers can save time and expedite the sale timeline. Working with a business broker is ideal. Your broker may have specific procedures in mind for your company, but generally, vetting business buyers includes the following steps:
- Verifying their financial ability to purchase the business
- Checking their references and looking into their reputation
- Interviewing them to find out whether they’re a good cultural and strategic fit
Your level of involvement in the vetting process depends on you. Before you list your company, you and your broker can discuss the ideal buyer. Once your broker understands what you’re looking for, they can confidently vet interested parties and recommend the most qualified potential buyers.
Protect Your Sale With Expert Brokers
As a business owner who has your company’s best interests at heart, you may be able to spot many of the signs that a buyer is unqualified.
However, some red flags are less obvious. If you don’t find a problem until you’re deep into the process, the sale could fall apart, and you’ll be back to square one.
How Sunbelt Business Brokers Can Help
At Sunbelt Business Brokers, we focus on small and medium-sized businesses, and we’re uniquely attuned to the needs of sellers like you. Our business brokers deal with potential business buyers every day, and we know how to quickly size up an interested party.
Want to learn more about selling your business with Sunbelt Business Brokers? Check out our free business valuation calculator or contact us today!