by Glen Cooper, CBA
Continuing on the importance of confidentiality from Part 1, this post will discuss how to qualify your buying prospects while still keeping your business identity concealed.
Step 2: Pre-Qualify Buyer Prospects
Screening and pre-qualifying buyer prospects is perhaps the business broker’s most valuable service to protect seller confidentiality. Make sure this is done in your business selling process.
Business brokerage industry statistics indicate that over 90% of buyer prospects who call on business-for-sale ads are unqualified for some reason. They lack the necessary money, skills or courage to move forward. The successful business broker survives by mastering qualifying and screening techniques!
Establish a process of screening and pre-qualifying prospects before the first ad appears.
Neither brokers nor sellers can afford to spend time answering detailed questions posed by these often well-intentioned, but nevertheless unqualified, ‘tire-kickers.’ If you are selling without a broker, don’t forget to establish a separate phone service, e-mail or postal address to receive inquiries. You don’t even want to think about handling buyer responses without a buffer between you and the unqualified tire-kicker.
Prepare a form to record information about the buyer prospects as each contact is made. Prepare a short ‘script’ to answer the questions you anticipate without giving away the identity of your business. It will take some experience before you know what questions buyer prospects will ask. Also give some thought to what type of buyer you want. How much cash do they need to buy your business? What minimum skills and background must they have? How are you going to ask for, and collect, this information?
When the buyer prospect contacts you, establish rapport by setting up a fair exchange: an answer-for-answer trade off. For example, get the name and contact information of each prospect in return for giving them your personal name. When they ask, “What’s for sale?”, tell them it’s a business that requires at least $XX,XXX dollars cash down. With assurance that the prospect has this type of cash reserve, you might then give them more details about the type and general location of the business. Keep trading information until you get enough in return to decide whether or not this prospect meets your minimum criteria for further contact and qualification.
Anticipate at least a 50% drop-out rate after this first stage. 50% of the callers to brokerage offices don’t allow themselves to be qualified. Our follow-up research over the years indicates that these people are best left un-pursued. If a buyer prospect isn’t open and forthcoming upon first contact, that prospect is usually unqualified. They don’t have the money; they don’t have enough experience; they are your competitors looking for information; they are hopelessly naïve about business-buying disclosure requirements; or they are just difficult people. In any case, you don’t need them.
Visit our free Guide to Selling Your Small Business for more tips on selling a business and things to keep in mind as you go through the sales process.