I was on the phone today with a seller (ProSell Client) and he asked me this question:
"I am selling my business and have started to receive phone calls and emails from potential buyers. What questions (please list them all) should I ask them to prequalify them and make sure they're a viable candidate to buy my business? Also - are there any other items (paperwork) I should get from them before showing them my business and financial information?"
In so many words - here was my answer back to him:
Being prepared when potential buyers contact you about the business for sale is a very good idea. Too many sellers are unprepared and miss good opportunities or get involved with unqualified buyers.
The five key questions you should ask are:
1. How much money have you got for a down payment and working capital?
2. What's the value of property or investments you have that can be used as collateral to secure any notes used in seller financing?
3. What's your business experience and does it prepare you to know how to operate my business?
4. Have you made offers on other businesses? If so, why didn't they result in deals?
5. If you're interested in buying my business, are there any other people who will be involved with you?
The answers to these questions will give you a good idea of whether the person has the funds and background to purchase and succeed in the business. You'll also learn if the buyer has realistic expectations about purchasing a business and is motivated, as well as whether there are other decision-makers with whom you'll need to work.
On the first meeting, you want the buyer prospect to sign a non-disclosure agreement. You can get these forms from many publishers of legal documents and find them in law libraries and online. Also, let the buyer know you need a copy of his or her financial statement and resume, if the prospect wants to see any information on the business. In return for information from the buyer, the seller should provide a one- or two-page summary offering basic information about the offering, including a summary of financial information, and some details about the business.
Any buyers who aren't willing to share their financial and work information, or unwilling to sign the non-disclosure declaration, should be crossed off the list of potential buyer prospects.
I would love to hear more feedback and possible answers to this seller's question from other ProIntermediaries / contributors on this topic. Please reply and comment below - thanks.