Sell
Your Business Tips, Hints & Techniques:
Enter
your name & e-mail address below and each week I'll send you
detailed tips, facts, resources & ideas you can use right
away to help sell your business faster and for more money.
Step
3 - Finding & Qualifying Buyers
Follow Up And Deal With Buyer Feedback
To Your Selling Memorandum
Soon
after you send the buyer your Selling
Memorandum they will begin to respond with questions
and requests for more specific information.
This
creates a problem: The prospect has a legitimate need
for details about your business not included in your Selling
Memorandum and you have a legitimate need to make sure sensitive
information doesn't get into the wrong hands.
Consider
that of all the prospects you talk to about your business, only
one will actually buy it. But all the other prospects
will still posses the knowledge you shared with them and you
can't afford to have confidential information such as customers
lists, recipes or other trade secrets getting in to the wrong
hands.
So
managing the disclosure of information about your business and
making judgments along the way as to which prospects deserve
your time and attention are important keys to successfully
selling your business.
Here
are some things you can do to identify the best prospects
and provide them with just enough information to
move them through the buying process.
Ask
The Buyer To Submit Their Questions And Requests For More
Details In Writing
In
order to protect your confidentiality, I strongly suggest that
you tell the buyer to put his requests/questions in writing.
Doing it this way:
•
Allows you to think
through your responses more thoroughly before responding
•
Prevents you from spilling too much information off the
top of your head
•
Means you won't get interrupted at the wrong time - imagine
if 5 buyers have your selling memorandum and each called you
at your office whenever they thought of a new question.
•
Puts all your communication in writing, so there is less chance
of misunderstandings - you can always refer back to what
you actually wrote instead of trying to remember what you said
days or weeks ago.
•
Saves you time - certain questions will come up again and
again. By putting your answers in writing you will have
a pre-written response ready whenever a second or third prospect
asks the same question.
So,
try to keep the initial communication after the Selling
Memorandum confined to e-mail: it's quick, confidential
and allows you the time to think through your responses carefully.
Continue
To Qualify The Buyer Throughout The Process
An
additional benefit of asking prospects to submit their questions
in writing is that it is provides another opportunity
qualify the buyer.
A
professional will understand your request and gladly cooperate.
Many buyer prospects already own, or have owned, a business
and know the importance of confidentiality.
An
unprofessional prospect on the other hand will often resist
this request and pout about the "inconvenience".
Also,
the weak prospect will often submit poorly written or
unclear requests/questions.
Even
though you did some qualifying before you sent the prospect
your Selling Memorandum, continue to observe the buyer:
**When
they do communicate with you, is it obvious they have taken
the time to prepare their questions and comments or does it
seem like they are flying by the seat of their pants?
**Do
they respect your time and your need for confidentiality
or do they call or show up unannounced?
**If
they take issue with your price, recast financials or other
elements of your offering, do they make a reasonable
case for their objection or are they just fishing for
a low ball price
Eventually
you will accept a Letter
Of Intent from just one buyer and enter into an exclusive
negotiation. At that point (and during Due Diligence) you will
have to reveal all the details and secrets about your business.
If you can't see yourself making this kind of a commitment to
a particular buyer than there is no need to go any further -
cut them loose now!
Balance
The Buyer's Need for Information With Your Need For Confidentiality
Sometimes
you will get requests for information from a very good buying
prospect that you just can't fulfill. For example, after he
receives your Selling Memorandum, the buyer may request to see
a list of your customers or suppliers.
You
must determine why the buyer wants this very
specific information. Does he want to steal your customers
from you? Or perhaps (and more likely) the buyer wants to see
if you are overly dependent on one customer. If 80% of
your revenues come from just one or two clients, that is a legitimate
red flag that would concern any buyer.
But
your prospect doesn't need a complete list of you customers
along with contact information to find this out. Instead, you
can prepare a report that shows what percentage of your revenues
comes from each customer (or the top 10 or 20 customers if that's
more appropriate).
So,
whenever a buyer makes a request for an entire category of information,
don't flatly refuse. Instead, try to figure out the buyer's
specific need or concern and then provide just enough
information to satisfy that need.
In
addition to the names and contact information of your customers
and suppliers, information that should be off limits until
a buyer signs a Letter Of Intent should include all proprietary
information regarding your manufacturing processes, blueprints,
recipes, product diagrams.
Remember:
Only one of your prospects will end up buying your business.
But all the other prospects will still posses whatever information
you give them after they drop out.
So
a good question to ask yourself when deciding whether or not
to provide certain information to a prospect is:
If
this person does not buy my business, could they use this information
to harm my company's value or the success of the new owner?
If
a buyer absolutely insists that you provide a certain piece
of information that you are uncomfortable providing, you have
three choices:
1.)
You can flatly say "no" and risk losing him as
a prospect.
2.)
You can give him the exact information he asked for
3.)
You can prepare a report that provides just the information
you are comfortable revealing and hope that it will satisfy
the buyer's need.
Exactly
how you handle a situation like this will depend on the quality
of the prospect who makes the request.
You
should rank all your prospects according to their qualifications
and desirability - Which prospect do you want to take
over your business? You may decide to give that prospect much
more detailed information than the buyer at the bottom
of your list.
But
whatever you decide, make sure that the buyer understands
you are not trying to hide anything. There is certain
information that you are uncomfortable releasing now, but that
once the buyer has submitted a Letter
Of Intent he will have complete access to your business.
Moving
Forward
Gradually
some buyers will eliminate themselves from consideration. Others,
you will eliminate due to a lack of agreement on the
issues surrounding the sale.
But
if a well-qualified prospect is interested after reading
your selling memorandum and have had their questions answered,
you will want to set aside an hour at night or on the weekend
and talk to your prospect over the phone about the specifics
of the possible deal. In addition to the price you may want
to discuss:
•Down
payment and other financing terms.
•Your
future employment with the company
•The
future of key employees with the company
•Any
assets that will be removed from the company by you at the close
such as a company car
•A
non-complete clause
The
next step is for the prospect to visit and tour your facility.
You should reserve the privilege of an on-site visit for only
the most qualified and interested of prospects.
Site
visits are time consuming to prepare for, may be difficult
to schedule and have the potential to unnerve your employees.
Buyers
will often want to see the business immediately. Buy you will
want to do as much as possible with the buyer via e-mail,
phone and through your well prepared Selling Memorandum before
the prospects visits.
If
the buyer isn't enthusiastic at this point there is no need
to go through with a site visit.
Sell
Your Business Tips, Hints & Techniques:
Enter
your name & e-mail address below and each week I'll send
you detailed tips, facts, resources & ideas you can use
right away to help sell your business faster and for more money.
NEXT:
The Site Tour - Have The Buyer Visit Your Business
The
Six Steps To Selling Your Business
Step
1 - Preparation Step
2 - Valuation Step
3 - Finding Buyers
Step 4 - Structure The
Sale Step 5 - Due
Diligence Step 6 - Closing
