Let’s examine the buyer qualification process from business owners looking to sell their company. A common question we receive from owners is, “How do we find the right buyer for a business that is for sale?” For good reason, business owners are concerned with the legacy of their company and want to ensure there are checks in place as potential buyers move through the buying process. In Transworld’s experience, it is difficult to sell a business if the buyer and seller involved in the transaction do not get along. So, there is a qualitative aspect to our qualification process.
What is a Qualified Buyer?
A qualified buyer is a buyer for your business that meets two initial checkpoints. First, the buyer will need to have the financial capability or access to capital to invest in a business in your sales price range. Secondly, they need to have the skill set to purchase a small business in the industry they’re inquiring about. However, depending on the business this may not always be clear-cut. If, for example, the business already has management in place and is run owner absentee, limited experience can be appropriate. A good example where a buyer may not be the right fit is if the new owner will require a master plumber’s license and the buyer does not have one.
What does Financially Qualified Mean?
A financially qualified buyer is someone who has acess to capital they can liquidate to invest in a down payment and the purchase price; i.e. a savings account, 401K or HELOC, or they are capable of receiving financing from a bank (they have good credit and a clean record).
How Long is the Buyer Qualification Process?
The buyer qualification process is not a long process and can be completed in a few ways. After inquiring on businesses for sale, a business broker will set up a phone appointment or in person meeting to discuss the business for sale. At this time, the broker and buyer will have a conversation about business goals, financial capabilities, and their prior experience. Part of the buyer qualification process is completing a buyer profile which provides answers questions that includes if the buyer wants a franchise business or real estate included in the transaction?
How Can You Become a Qualified Buyer?
It is rather straightforward to become a qualified buyer. All it requires are the following items:
- Commitment to the sale process
- A phone call or meeting with a business broker
- Being prepared with personal financial information
- Submitting a buyer profile
- Communication with your business broker
- Signing non-disclosure agreements on businesses for sale
Why Do We Qualify Buyers?
This is really a two-part question, “Why do we qualify buyers for sellers?” and “Why do we qualify buyers for buyers?” Transworld Business Advisors is very passionate about the small business community and we take our role in helping it continue to thrive seriously. So, for sellers, we qualify buyers to make sure they have the finances and experience to reach closing, but also to ensure that the legacy of the selling business can be kept intact. For buyers, we qualify them to make sure they are set up for success with their acquisition. We would never want to help a buyer acquire a company if they don’t have the capital to run long term, that would be doing our clients a disservice. At the end of the day our role as transactional advisors is to set both sides of the transaction up for success!
Transworld Business Advisors is passionate about small business owners, and we want you to become a successful business owner in your own right. We help people find their own version of the American Dream! Are you ready to buy a business and become boss free? We would love to help make it happen for you and we can schedule a free consultation below with one of our trusted staff.