Qualified buyers are business buyers with qualified financing that makes them able to afford the asking sale price of your business.
So you’re ready to sell your business. Is it time to contact a business broker, prepare your company for sale, and wait for the offers to come in?
Well maybe. It often takes time for a business to sell, and one of the key differences between selling a business and a house, for example, is that finding the right, qualified buyers at the right time can be a lengthy process.
Learn more about the 11 questions to ask yourself if you are considering selling your business in California.
One reason is that you need to find qualified buyers. But what does that term mean when it comes to selling your business? Here are some things you need to look for.
Financial Ability
First, qualified buyers need to either have the necessary cash to purchase your business or be able to qualify for financing. This is the most important characteristic: if they can’t pay for your business one way or another, you need to move on and keep looking.
There are options, though. If the buyer can secure some of the necessary funds through a Small Business Administration (SBA) loan and has some cash available, you, as the seller, may be able to carry a note on part of the purchase price. This offers you some residual income, earning interest from the sale of the business, and allows a buyer to make the purchase even without having the full amount of funding in hand.
This can be a great option, and it is something to discuss with your accountant and business broker. Often, there can even be tax advantages to this method.
Business Ability
From time to time, you will run into someone who wants to buy a business, and maybe even has the money to do so, but they have no idea how to run a business. Selling a business to this person would be a disservice to your customers, clients, and any employees who might remain at the company after a change of ownership.
Additionally, if that person needs to finance any part of the business purchase, they will likely struggle to do so. Lenders want to see a proven business track record before taking the risk of lending money.
A qualified buyer will not only be financially sound, but they will also have some business ability.
Specialty Skills and Licensing
This is one area where things can get tricky. To purchase businesses in California, you must hold specific licenses and certifications. For instance, for a landscaping and tree business to transfer ownership, the new owner must have, or be able to obtain, a general contractor’s license and other specific types of licenses that are easier to obtain if you are already a general contractor.
In a recent sale, we were able to find a buyer who had a General Contractor’s license and quickly obtained the necessary certifications; however, that is not always the case.
In the case of medical practice, the purchaser must be either a practicing physician or an established company, such as a hospital conglomerate or healthcare provider. You can’t sell your practice to an investor who simply wants to manage the practice.
This affects your marketing, as your list of buyers is smaller, and you must target them specifically.
See: Buying A Seasoned Business
A Buyer You Are Comfortable With
As a business owner, you probably have pretty good instincts when it comes to people. You need to trust your instincts when selling your business. If you are not comfortable with the buyer or the deal, there may be a reason for that.
Remember, if an offer seems too good to be true, it probably is. If something seems suspicious, investigate or have your business broker and other team members review it for you. If you are selling a business to someone, you will likely spend some time together. You must be comfortable with each other.
What makes a potential buyer a qualified buyer? That depends on you and your business. Take the time to get to know who they are and whether they are valid prospects or just wasting your time.
Don’t try to sell your business alone. If you are ready to value and sell your business, please get in touch with us at Rogerson Business Services.
We would love to talk with you about how we can help you sell your business for a fair price to the right buyer at the right time.
Andrew Rogerson is a certified business broker based in Sacramento, California. Call Toll-Free at (844) 414-9700. If you prefer, email him at support@rogersonbusinessservices.com. Andrew services the whole state of California.