Currently, with the fall in the markets that have been experienced, it is a buyer’s market. Hopefully, this will mean that more of the buyers that you hear from will be serious about buying. Great news for you! You will, however, need to stay on top of the enquiries so that you can keep the buyer interested right through until you hand over the keys.
Swiftly respond to enquiries
Respond to enquiries as quickly as possible. Otherwise, buyers might get frustrated and pursue alternatives with more responsive sellers.
Sometimes, of course, it may take a few days to obtain the information the interested party is requesting. But you can still respond immediately with something like: "Thanks for your enquiry. I should be able to send you this information the day after tomorrow. Thanks for your patience."
At least the buyer knows what’s happening and that they're not being ignored.
Filtering out timewasters
Be on the lookout for tell-tale signs of the timewaster: window shoppers with no real interest in, nor the financial capacity to, actually buy your business.
Ask them if they have experience of the sector or similar sectors and in running businesses in the UK generally. If the answer is unconvincing, this weakens their credibility as a potential buyer, so ask them why they want to buy a business with so little experience of the sector and/or running businesses.
But if they show they’ve done their homework on the industry and demonstrate a convincing passion for being their own boss, then they could still be a genuine prospect – especially if it’s a relatively uncomplicated business model (like, say, a pizza delivery business or convenience store).
Make sure that you get an idea of the timescale that the buyer is working towards. If it’s much longer or shorter than your anticipated schedule, then it may not be worth proceeding further.
You should also get an idea of how they plan to finance their purchase. A buyer with partially or fully arranged finance is preferable to someone with little apparent clue as to how they will fund the acquisition.
Case study: How did you weed out timewasters?
"The timewasters basically wanted to know how much we made and that’s it. I didn’t want them to look at just that," says Toundjel Chimen, who sold Hamlyns dry cleaners through BusinessesForSale.com.
"I wanted them to look at the shop, what we provided to the community and what sort of service we provide.” I wanted to find “someone to take over the business and carry on the good work that I’ve put in over the last 25 years."
Even if someone is convincing enough via email, you may develop doubts once you speak to them over the phone or in person.
"I could tell by their voice how sincere they were and if they were genuine,” continues Toundjel. "There were about eight serious offers for the business, and I accepted two of them. I whittled it down to one and I’m happy with the person who’s taking it over."
When you’ve screened enquiries for timewasters and found a convincing buyer with a credible financial plan, you’ll need them to sign a non-disclosure agreement (NDA). Only once this is signed should you share with a buyer any sensitive commercial information.
Also called a confidentiality agreement, an NDA is an undertaking by one or both parties not to disclose sensitive information to third parties. It therefore reduces the risk that trading accounts, your customer database and other confidential information will be leaked to staff, customers or competitors to damaging effect.
A template NDA is a good starting point. However, it may be beneficial to have a professional adapt it for your purposes and ensure the document is valid under your and the other party’s jurisdiction.
Admittedly, if a signatory decides to break an NDA, there is little you can do to prevent them. However, an NDA does offer you legal recourse to seek damages and therefore serves as a major deterrent.
Meet the buyer in person
Meeting with the buyer will be the next step in the process. It will be a lot easier to negotiate with someone that you have met in person. If you are unsure of the negotiation process, you may want to get the assistance of a business broker at this stage.
The buyer will also want to perform due diligence on your business at this stage. You should be prepared for this. Make sure that you have any documents that the buyer may request ready so that you don’t delay the negotiations in any way.