As a business broker in North Carolina, I’m focused on seller representation. But I need great buyers to match with my great seller’s opportunities.
In our office, we receive a lot of buyer inquiries, but few are great business buyers. We’re currently enjoying a seller’s market, and we receive dozens of inquiries and multiple offers for businesses that can make a future business owner greater than $100K/year.
Here are a few things that help get a buyer to the front of the line when a great seller opportunity hits the market:
Quick response to an NDA (Non-Disclosure Agreement)
By now buyers know that if they are going to submit an inquiry, they will receive an NDA, or Non-Disclosure Agreement as a first step. It basically says “I may share confidential information with you, but I need you to promise not to disrupt this operational business…” We send dozens of these out weekly, but many of them don’t come back.
We’ve made a promise to our sellers to protect their confidential information, and this is our first priority. It also screens buyer suspects from serious buyer prospects.
Returning NDA’s quickly allows us to move to the next stage of buyer screening.
Candid Disclosure on Approximate Financial Situation When Buying a Business
Along with the NDA, one of our first lines of communication is asking a buyer to share a net worth and a down payment. We’re just asking; we’re not even asking for proof in this first pass (it comes later of course). But often buyers disclose zero or $1.
It’s understandable if buyers do not want to disclose details about their financial situation early in the process, but at the same time they are indicating a desire to buy a business, so it makes sense that we need to know their financial fitness for the task.
Sharing accurate details about a buyer’s financial situation makes for a great buyer, especially if they have great resources!
Pre-Approval from a Lender to Buy a Business
The “professional” buyer has taken the time to talk to an SBA banker or broker and received a letter stating that they’re financially capable of offering a down payment, and could be great candidate for an SBA loan, up to a specific dollar amount.
This is a great solution for people who don’t want to disclose a net worth/down payment, and it shows that a buyer is serious and has taken the first step in buying a business.
The serious buyer has also put together a resume for a seller. Sure, entrepreneurs are cowboys who blaze their own path, but they also know that they must sell themselves to get what they need. Putting together a resume that shows buyer experience is a great way to show a broker and a seller that a buyer is serious about purchasing a business.
Doing so can help the buyer become excited about a possible “fit,” and it’s required by many lending institutions.
Buyers who submit a resume that aligns with a business of interest are taken more seriously.
Bonus! Letter To The Seller
Much like the housing market, it’s not uncommon for a business buyer to write a personal letter to a seller stating their sincere and earnest intentions for their business. This often comes in the later stages after a buyer/seller meeting, especially at the offer stage.
Business buying can be a clinical and “quantitative” process, but adding a letter that shares what the business would mean to a buyer and where they would like to take the business adds a “qualitative” factor that, by definition, simply can’t be measured.
Don’t be afraid to make it personal if you are sincere and really want to buy the business.
At the end of the day, it comes down to the money. The buyer closest to the full asking price and with the best terms will ultimately win the deal.
Few sellers will argue with a full-price offer, all cash, or a quick close, but the points discussed above will enhance a buyer’s chances of getting to closing table. My firm is always on the hunt for great buyers like these!