Showing Process

An effective marketing and advertising program should make the telephone ring. If the Seller has chosen to handle the inquiries himself, then maintaining confidentiality and smooth business operations will be a constant challenge. Hopefully, the Seller has hired a business advisor to handle buyers and the sale process. Buyers must be led politely yet firmly through a deliberate education and screening process. This process will save time and effort for everyone involved.

Educating & Screening

All buyers need some education. Of course, novice buyers will need more. But even “experienced” buyers must understand the process ahead for this particular business. Once educated, buyers must be screened, to ensure that they have the motivation, skills and resources to buy and run the business. What motivates each Buyer? Is he out of work, and need a business to “buy a job?” More commonly, he may just be a “Lookee-Loo” or competitor who enjoys cruising business brokerage websites on Sundays and trying to ply confidential information from business brokers.

Face to Face is Best

The best way to test a buyer’s motivation is to make him come into the office for an interview before receiving more information. The interview should probe the Buyer’s personal financial information and background, to ensure that he has the cash, credit and skills to buy and run the business. A face to face meeting also allows the Business Advisor to develop rapport with the Buyer that will often pay dividends later. Unfortunately, many Business Brokers today try to handle this stage via email, fax and the telephone—missing a unique screening and rapport-building opportunity.

Confidentiality Agreement

Once the Buyer is deemed qualified, he can be allowed to sign a Confidentiality Agreement, or “Non-Disclosure Agreement” (NDA). The Buyer agrees to keep any information that he receives about this particular business confidential, and share it only with his advisors. The Buyer also promises not to contact the employees, customers, suppliers, and landlord of the business without the Seller’s permission. If a Broker is involved, then the Buyer acknowledges that the Broker introduced him to the business, and agrees to work only through the Broker.

Showing the Business

The Buyer can review the Confidential Business Profile once he has signed the confidentiality agreement. Other information—such as photos, videos, recasted financials and other summaries—may also be shared at this stage. However, it is important that the Buyer also understands that more detailed and private information, such as tax returns or even a face-to-face meeting with the Seller, will not be provided until Due Diligence. The Buyer should be shown enough information to enable an informed offer, but not so much as to unduly risk confidentiality or waste time.

Showing the Money

To get to Due Diligence and see more information, the Buyer must make an offer, accompanied by a deposit check, that is accepted by the Seller. The sale should be made contingent upon the Buyer’s approval of the books and records, as well as the Seller’s approval of the Buyer, within a reasonable time, say 1-2 weeks.

Alan Lippincott is a business broker and BestSoCal owner who welcomes calls to (877) 420-6478 and Email Inquiries.  His comments should be regarded as general in nature and not taken as advice without a personal consultation and signed agreement.