What Makes a Qualified Buyer?
So you’re ready to sell your business. It is time to contact a business broker, get your company ready to sell, and wait for the offers to roll in, right?
Well maybe. It often takes time for a business to sell, and one of the differences between selling a business and a house, for example, is that finding the right buyer at the right time can take time.
One of the reasons is that you need to find a qualified buyer. But what does that term really mean when it comes to selling your business? Here are some things you need to look for.
First off, a qualified buyer needs to either have the cash they need to buy your business, or they need to be able to qualify for the financing to purchase your business. 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 get some of the money they need through a Small Business Administration (SBA) loan and they have some cash, sometimes you as the seller can carry a note on some of the purchase price. This offers you some residual income earning some interest off the sale of the business and lets a buyer make the purchase even without the full amount of funding in hand.
This can be a great option, and it is something to talk over with your accountant and your business broker. Often, there can even be tax advantages to this method.
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 or clients and any employees who might stay at the company after a change of ownership.
Also, if that person needs to finance any part of the business purchase, they will probably have a hard time doing so. Lenders want to see a proven business track record before taking the risk of making a loan.
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. In order to buy some businesses in California, you need to have certain licenses and certifications. For instance, for a landscaping and tree business to transfer ownership, the new owner must have or be able to get a General Contractors license and other specific types of licenses that are easier to get if you are already a general contractor.
In a recent sale, we were able to find a buyer that had a General Contractor’s license and quickly got the needed certifications but that is not always the case.
In the case of a medical practice, the purchaser must either be a practicing physician or an established company like a hospital conglomerate or health care 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.
A Buyer You are Comfortable With
As a business owner, you probably have pretty good instincts when it comes to people. You need to listen to those 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 shady, investigate or have your business broker and other members of your team check things out for you. If you are selling a business to someone, you will end up spending some time together. It is really important that you are 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 a valid prospect or just wasting your time.
Don’t try to sell your business alone. If you are ready to sell, contact us here 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.