Selling a business Buyer Qualification / Providing Information / Showing the Business

7. Buyer Qualification

Statistics show that only 10% of potential business buyers end up buying a business. In other words, 90% are "tire kickers."  If a seller were to spend the same amount of time with every potential buyer who inquired about his/her business, he/she could easily become overwhelmed by repetitive time-consuming questions and possibly become discouraged from selling. Also, since the best way to learn about a business is to pretend you are a business buyer, potential buyers could end up becoming future competitors.

For these reasons we strongly advise business sellers to seek professional advice from business brokers when selling their businesses. Qualifying buyers is key in selling a business, and at Toronto Mergers & Acquisitions, we pay particular attention to screening buyers before presenting them to sellers.

8. Providing Information to the Buyers

Not all information about the business should be given to potential buyers. Confidential information should be kept until the buyer shows his/her commitment by making a reasonable offer and providing a deposit. Naturally, you cannot expect an offer from a buyer before giving reasonable information. But what is reasonable? It is difficult to answer this question because it depends on the type of business being sold. In general terms, any information that could be used by competitors should not be given at an early stage.

9. Business Showing

Showing the business to potential buyers after they have been qualified is a necessary step in selling a business. The "showing" is important since buyers need to picture themselves managing the business before making a decision about buying.

Most sellers try to paint a perfect picture of their business. This is generally not a good idea for many reasons:

  • Buyers expect the business not to be perfect, so the seller(s) lose credibility.
  • If the buyer is misled, he/she will ultimately discover the problems during the due diligence period and back off. The seller will end up wasting a lot of time and money on legal and accounting fees.
  • Most buyers look for businesses they can improve and expect to make more money than the previous owner. If the business is already perfect, it is difficult to improve and it loses its attractiveness as a result.

We advise that sellers present the most accurate picture of their business by simply telling the truth and revealing "the good, the bad and the ugly"about the business. They will save a lot of time and money and will have a more enjoyable selling experience.


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