If you’re selling your business, it’s easy to feel overwhelmed by the process of marketing your company, fielding inquiries from buyers, and conducting preliminary due diligence on your buyers. The right business broker can help you sell a business without the stress and chaos that comes from a DIY approach. But when your business broker presents you with a list of potential buyers, what should you look for? Here are five traits to seek in a buyer if you want a smooth, conflict-free transaction.
The Right Qualifications
Some buyers are just window shopping. Others have pie in the sky dreams for owning a business with little understanding of what ownership actually demands. So the right buyer has the right qualifications, including a history running a business and access to capital. If a buyer has neither, or hedges about how they intend to finance their purchase, be very skeptical.
A Plan for Post-Closing
Compared to integration, buying a business is easy. Many mergers fail after closing, as buyers attempt to merge two businesses and two cultures under one umbrella. The right buyer should have a clear plan for integrating the two businesses after closing, and should begin working on that plan as soon as negotiations begin. With this plan should also come clear directions for how and whether they intend for you to participate in the business after closing.
It’s easy for buyers to get as distracted and overwhelmed as sellers. But a chronically unresponsive buyer can slow down momentum, causing the deal to stagnate and eventually lose value. Look for a buyer who is responsive to messages, and who offers clear and direct communication—not unclear or meandering answers to simple questions.
A Good Reputation
Good buyers bring good reputations to the table, especially if they’ve bought a business before. Ask for references, and do your research to assess the fate of prior businesses. Does the buyer have a history of extracting as much value as possible, only to walk away from a failing business? Or have they successfully bought and grown businesses similar to your own?
Experience in your industry is a great attribute, which means that selling to a competitor can actually help your business. If your buyer has no industry knowledge, they’re at a significant disadvantage when they take the helm. Don’t hesitate to ask how they intend to make up for a lack of industry knowledge. And don’t assume that general experience buying businesses is a substitute for understanding the unique challenges of your niche.