The effort you put into getting your business off the ground could move mountains, but have you approached selling your business with the same commitment? You don’t want to be blindsided by a deal that falls through–the weeks of your time spent hammering it out are an investment that you want to be a sound one. You can best avoid an unpleasant surprise by getting to know your prospective buyer.
Are they serious about making the purchase? Do they actually have the cash on hand or financing lined up? Here are several avenues of investigation to test their resolve:
Get full contact information. The most basic of the basic–all the more reason to be absolutely certain you have a full name and contact information for each of the involved parties. You don’t want the deal to fall flat, only to look back and see obvious red flags at the very beginning. If there’s more than person in the deal, make sure you are getting full information for each one of them and are able to freely communicate with each one. One person may be the primary person you work with, but that doesn’t mean they should be the only one you actually know.
Get a basic history. Build on the above. Where have your prospective buyers worked in the past? Have they previously owned another business? Approach it as a job interview. Afterall, you probably want to be sure your business is in good hands and there may a transition time in which you would be working side by side with these people.
Where do their funds come from? Be pragmatic–you need to have concrete evidence that they have the means to make the purchase. Ask how much they have and where it is coming from. Don’t worry about this being awkward; a serious buyer will be prepared for this question.
What are their immediate financial needs for your business? A serious buyer will often have their own requirements you and your business must meet. A minimum monthly income your business must bring in is commonplace. Does your business meet their qualifications?
Will they sign a confidentiality agreement before you share proprietary financial and business operation information?
Don’t give them too specific an answer to the above until they’ve agreed to take this standard step. If a buyer balks, it is a significant red flag.
What is their timeframe? If they can’t answer this unambiguously, they are probably not all that serious.
Ask why they want to buy your particular business. You business possesses more than mere monetary value. The years you’ve put into it and the relationships you’ve built reflect many of your core values, which you would like to remain fundamental to the operations of the new management. If you are uncomfortable with what they have to say, you may not want to go any further.
Get the counsel of a Creative Business Lawyer® to ensure the process goes smoothly and your interests are properly protected.
If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.
Have you sold or purchased a business before? Share your experience in the comments below.
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