As we discussed in "How
To Write A Business-For-Sale Ad", you need
an effective way to field responses from your ad.
Whether you post a phone number
or e-mail address in the ad or you received a Business Buyer
Registration Form from TheBizSeller.com, -
your first meaningful discussion, and you first opportunity
to qualify the small business buyer will usually be by phone.
The main objective of
this initial phone conversation is for you to learn as
much as possible about your prospect so that you can determine
if it’s worth your time to actually to take the next
two steps.
Those two steps
by the way, are:
1.) Have
the prospect sign a Confidentiality Agreement (also call
a
Nondisclosure Agreement or NDA).
2.) Present
the buyer with your Selling
Memorandum.
But you will only
proceed with these steps if you like what you hear during
your initial contact with the buyer.
How
To Control Your Initial Contact With The Buyer
As mentioned often
on this site, qualified prospects will have many business
opportunities to choose from. They’re busy people.
Realize that a good prospect will
try to pre-qualify you over the phone just as
you are doing to him.
To get control of
the conversation you need to be the one who is asking
the questions.
If you allow
yourself to be used like a reference librarian, the prospect
will ask a long list of questions, getting as much detail as
he can about you and your business. Many times this
will lead to your confidentiality being compromised.
When a prospect
asks a question, acknowledge it, give a brief answer
and immediately ask a question of him.
If
they insist on knowing specific numbers about profits
and expenses or information about customers, let them know
that you are not comfortable giving out that information just
yet, but you do have a Selling
Memorandum that you will send once you receive a Confidentiality
Agreement.
An
experienced and professional business person will understand
and accept this request.
If you allow them
to, prospects will just ask a list of questions until
they have all the information they want. When this happens
the prospect often loses interest or finds more reasons not
to proceed than they do to go forward.
Remember: the person
asking the questions is the one who is in control
of the conversation. So, here is a list of
some of the questions you’ll want to ask a potential buyer
in that initial phone conversation:
1.)
Tell me about your business background and experience
.
1A.)
Why are you interested in owning this type of business?
2.) How
much research have you done on the industry?
3.) How
long have you been considering a business of your
this type?
4.)
What
is your time frame for actually buying?
5.) Are
you currently employed or unemployed?
6.)
Have you ever been in business for yourself? If so, why did
you get out of that business?
7.)
Do you have a partner or spouse who will be involved
in the buying decision? (If they have a spouse,
try to get them involved as much as possible. If you
meet the buyer in person, do everything you can to get
him or her to bring their spouse/business partner/investor.
Later on, when they are making their final decision,
you want to have all these people well informed.)
8.)
Do you have at
least xx amount of cash available to invest
now? (having enough for the down payment isn’t
enough. The buyer will also need enough money to cover
closing costs, working capital and reserves. So
add your best estimate for these things to your down
payment and make sure the buyer has it, or at least
can come close)
9.) In
the first year, how much profit will you need to take
out of the business to live on? (you will have a
good idea of what is realistic, if the prospect needs
a lot more profit to live on than the business
can generate than you know you don’t have a good
prospect)
10.)
Have you seen your credit
report recently? Is there anything negative on it? (Don’t
ask the more general question "Do you have good
credit?" People will answer that question "yes" no matter
what the truth is)
11.)
If we come to an agreement on
price and terms I’m sure you’ll do a thorough due diligence
investigation of my company. Likewise, when the
time comes, I’ll want to check your credit, work and character
references. Is that O.K. with you?
With these last
two questions what they say is as important as how
they say it. Nervous or noncommittal responses can
mean they are not prepared or have something to hide.
Questions 1-3
are open-ended questions that will get prospects talking about
themselves. Let them talk. You never know what
you’ll learn about their major motivations and their
level of preparation.
By now you should
have at least some feeling for the viability of this buyer.
Be
Prepared To Answer These Questions
In fairness, you
will have to answer a few questions from the prospect. After
all, he won’t take the time to move ahead without any
information.
Explain the absolute
necessity of confidentiality, tell them you have prepared
a Selling
Memorandum which they are welcome to read after signing
the NDA. But you can give some general answers to the
most obvious questions.
Here are some questions
you should be prepared to answer when you first talk
with your prospect:
1.)
Why are you selling?
2.)
What is your price? Will you finance? What
down payment are you looking for?
3.)
How long has this business been in existence?
4.) How long have you been the owner?
5.)
Will you stay on for a training period? / Will you be
available after the sale for consultations?
6.) How
much income can a new owner expect in the first year?
7.)
What are the opportunities for
growth? / Why is this business unique or special?
Much
of this information will have already been provided in your
advertisement, but if you are talking to a buyer who was
referred by your account, lawyer or some other source,
this may be new information to them. Still you should try
to answer these most basic questions without divulging
any confidential information.
Question #1 is perhaps
the most important question. A lot of the advice buyers
read and hear tells them to be skeptical of
an owner’s reasons for selling. After all, why would
anybody want to sell a thriving business?
Buyers don’t have
the right to know all the details about personal issues
like health or a divorce, but you do need to have some
prepared response to this question (health, retirement,
pursuing new opportunities) that sounds reasonable
and positive.
Hopefully question #7
will be the focus of the entire conversation. If you haven’t
already done so, take some time right now to
list some of the positives about your business.
Taking
The Next Step
After
answering a couple of questions, try to get an e-mail address
or fax number where you can send the confidentiality agreement
and your "Buyer Information Sheet". (For an example
of this form, click here for the Business
Buyer Registration Form we use at here at TheBizSeller.com)Let
them know that once you have received these forms, you will
send them your Selling
Memorandum with more detailed information.
Any
viable, professional and reasonable candidate should be perfectly
agreeable with this process.
Anyone
who wants you to give them detailed and personal information
about your business without signing a confidentiality agreement
is being unreasonable.
If
they are unreasonable now, they will be that way throughout
the entire process.
You
can save yourself a lot of time and frustration by cutting
them loose right now.
One
Other Piece Of Advice
In all your phone
conversations take notes. Your prospects will
give you clues on how to sell them – if you get
them talking about their goals and priorities.
It may be weeks before
you actually meet in person and you’ll forget
too much valuable information in the interim if you
don’t take notes.
Notes
about what?
Their
goals, their aspirations, their experience, the names of their
spouse and children, why they want to own their own business,
those aspects of your business that most interested them
etc. etc.
The
selling process begins the moment you first speak with your
prospect. Start to learn as much about them and what makes
them tick as you can. It will pay dividends as you move into
the negotiating phase of the sale.
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Dealing
With Buyer Feedback And Questions
