Are You a Serious Business Buyer?
Individuals who want to buy a business contact business brokers and sellers. How will the latter know who among these are serious buyers? Who are the “time wasters”? If you meet the following list of criteria, you are a serious business buyer.
· You know what you want. As a serious buyer, you know the type of business you want to get into. You want one that matches your skills and experience. You also know where this business should be located. You are not a “tire kicker” who inquires about businesses for sale and cannot make up your mind on whether to get into sales, retail, service, manufacturing, etc.
· You do not waste time. You identify target businesses or acquisition prospects, do your research, and you are ready to make contact, set up appointments and visit these companies. You meet with potential financial partners. You discuss with the seller or broker important considerations. You focus on businesses that are suitable for your background.
· You have realistic expectations. You understand that there is no perfect business for sale and that you have to take on some risk.
· You are “transparent” to the seller. You disclose your identity as the buyer. You are forthcoming about your reasons for wanting to get into the business and your financial situation or capability. This will lay the foundation for building trust as the transaction proceeds.
· Your resume is ready. This includes your education, achievements, skills, and value-added experience in business. You need to emphasize your understanding of the industry that you want to get into. It is this background that will tell you what type of business you are qualified to operate. Banks will consider lending to you less risky if you have knowledge of the business you are acquiring.
· You have the resources to buy a business. Getting a hundred percent financing is a rarity. You cannot purchase a business without any cash reserves or equity in some assets. You have to show proof through an income statement, verifiable financing ability, business and banking references, and borrowing capacity. You must have a substantial amount of money to at least pay for the down payment. Be ready to disclose the amount you can invest and how you plan to have the deal financed. Sellers and brokers want to know you have financing lined up or that funds from investors or partners are formally committed.
· You know the size of the business that you can buy. The size of the business that you can buy depends on the cash you have and the funding you expect to acquire. Seek professional advice about your finances and capabilities before making inquiries about businesses for sale.
· You are ready to sign a non-disclosure or confidentiality agreement. Signing an NDA shows the seller or broker that you are not a competitor. This step also speeds up the buying process as you can get all the information you require to make a decision about buying the business.
· You are prepared to submit a conditional offer or letter of intent. This shows the seller that you are not just testing the waters and not wasting his or her time. You can include a deposit with your offer.
· You are able to make a decision and act on it. Business brokers raise a red flag when they encounter clients who have been looking for a business to buy for more than a year. Such buyers usually belong to the “potential buyers” who are “tire kickers”. They turn down opportunities because of minor “flaws” or risks and are unsuccessful in buying a business.
As a buyer who wants to be taken seriously, you should prepare yourself before beginning your search for businesses for sale. You must try to be different from most “potential buyers” who do not follow through. Business brokers and sellers can tell if you are a “tire kicker” or a serious buyer – the question is – which one are you?
