How to Qualify Business Buyers?

One of the main things that deter business owners from selling their businesses themselves is the difficult process of qualifying potential business buyers. Statistics of business sales in North America have shown that only 10% of people actively looking to buy a business end up actually buying a business. This means that 90% of potential buyers never buy a business in their lives. If you are selling your business, out of 10 people who expressed interest in your business 9 will be wasting your time. The remaining one will finally end up buying a business but it might be another one than yours.

With these lousy statistics, most business sellers get discouraged while selling their businesses after spending a lot of their time with tire kickers. Sellers end up concluding that their business will never sell and take it out of the market.

In order to deal with this ordeal, we recommend two possible alternatives:

  1. List the business with a professional business broker: Competent business brokers know how to qualify business buyers. They will save business sellers’ valuable time and let them focus on the most qualified buyers. Business brokers apply rigorous processes and use their judgment to weed out tire kickers.
  2. Sellers could qualify business buyers themselves. These are some tips/hints that could help qualify buyers:
  • What is the buyer’s motive to buy a business? Is he/she unemployed? How urgent does he/she need to find a business?
  • Does the buyer have the necessary funds to purchase? Ask for proof of funds. If the buyer believes he/she will get most of the money from the bank, he/she is probably a dreamer.
  • How long has the buyer been looking for a business? A buyer who has been looking for more than 2 years and who hasn’t purchased yet has probably unrealistic expectations and will never buy.
  • Has the buyer put an offer on a business before? If yes, this is a good sign. This shows he/she has some readiness to act.
  • How analytical is the buyer? Buyers with financial expertise and/or long experience in the corporate world tend to over analyze business opportunities and have hard time making a decision. The small business world is so much different from the corporate world. Business practices learned in the corporate world don’t necessarily apply to small business.
  • Does the buyer see him/herself managing the business? This could be learned from the way the buyer talks about the business he/she is contemplating. If the buyer uses “I” frequently, it’s a hint that he has already projected him/herself in the business and there is a high probability he/she makes an offer.

Unfortunately, it will take much more than a few lines to explain the subject of buyer qualification. Most of the knowledge only comes after years of practice acquired in selling different kinds of businesses.

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Omar Kettani

I am a business broker in Toronto. I am specialized in selling businesses with less than $10 million in value. I have a master of Engineering from a top-notch French Engineering school and an MBA from the prestigious Richard Ivey Business school in the University of Western Ontario where I specialized in entrepreneurial finance. I have a long experience in banking, business ownership, marketing and finance. I dedicate my career to helping small and middle size business owners sell their businesses to the right buyers.

One thought on “How to Qualify Business Buyers?”

  1. Are there any Buyer Questionnaire, Buyer Business Application, Buyer Profile documents available for free out there? I’m sure brokers have various questionnaires or other documents they use to “screen” potential buyers that help to prevent “tire kickers”.

    Thanks

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