When representing the sale of a business in Florida, business brokers assume duties to the seller and, eventually, potential buyers. While the broker must market the business for sale and find viable prospects, he must also vet these prospects to ensure that they are serious, financially capable, and qualified to purchase the business.
One of the first steps in this process is to have prospects sign a non-disclosure agreement (NDA) before confidential details about the business are revealed. This legally obligates the potential buyer not to share confidential information that he receives in the course of his pre-purchase exploration of the business. This protects the business owner even if the prospect decides not to go ahead with the acquisition.
Simultaneously, the business broker should request proof of funds from the potential client to verify that they have the financial means to pay for the purchase of the business. This is of vital importance for the seller and for the business broker who will not want to “waste current” on visits and meetings with those who show that they cannot pay the sales price.
Finally, the broker may require a resume from the potential buyer, outlining his or her experience, skills, and qualifications in operating the business. This would verify that the prospect has the necessary background to successfully manage the company once acquired. It is common to see that the owner prefers to sell his business to someone who will maintain or grow the company in the future.
Additionally, the broker must properly qualify the buyer, as this could be their client throughout the selling process. Verifying the seriousness, financial capacity and experience of the buyer at the beginning creates a relationship of trust between the broker and the potential buyer. This makes it easier to work together on the next steps of the negotiation, detailed evaluation, sales agreement and closing of the transaction.
While these steps may initially seem tedious or discouraging to some prospects, they are very necessary to eliminate fruitless moments with people just looking to browse or simply “kill time” looking at business. With this, the broker is fulfilling his role as executor of good faith in the operation by generating legitimate expectations for the parties for the transition of the business.
In short, when the business broker manages to get rid of presumed buyers who do not have financial resources or who lack management capacity, he will be able to dedicate more time to qualified buyers with real purchasing intentions. Here an apt phrase from Steve Jobs comes to mind: "Time is a non-renewable resource, don't waste it living someone else's life."
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Author: Alfredo González (Alfred@negociosenflorida.com)
Image courtesy of Pixabay