The Importance of Qualifying Buyers for Your Business
Buyers generally fall within three main categories:
Financial buyers are purely interested in your business’s cash flow. Usually individuals or a business entity that requires a return on their investment but don’t necessarily want to be involved in the day to day running of the business. They’ll be looking for a healthy business with recorded growth that requires minimal change or intervention to continue operating successfully. Financial buyers will examine your financial records very closely.
A strategic buyer is looking to acquire your business to make it work as part of their own business strategy. For example, a buyer who runs a similar business to yours in the same or adjacent area may wish to purchase your business to remove competition. Also within this category is the buyer who is in a similar business but who is not a direct competitor. Strategic buyers are often prepared to pay the most for your business.
These buyers are people you know – family, friends or employees. This type of buyer knows a lot about your business already and could have personal reasons for wanting to see it continue. They might be willing to pay more for your business than a financial buyer but they’re also less likely to have the required capital for outright purchase.
Qualifying potential buyers
Four key elements to qualifying buyers:
- Asking about their financial ability to acquire the business. Desire to buy doesn’t always mean the ability to buy.
- Not giving out all business information straight away. You don’t want to provide your confidential information to parties who aren’t serious.
- If there is not an advertised price on your business, provide them with a ballpark figure and assess their reaction. This often eliminates people who simply aren’t realistic about the price.
- Asking whether they have any experience in the industry. They may be a current owner looking to add to their childcare portfolio, someone within the industry looking to take the next step, or an investor looking to buy a business and intending to employ managers to attend to daily operations.
Although many potential buyers may show interest in your business, it needs to be established who’s really interested and who’s just looking. Qualifying buyers is very important as you don’t want to spend time and effort promoting your business to people unless they’re really interested.
At Sydney Childcare Sales, we know how to qualify buyers properly!
If you or anyone you know are thinking of selling a childcare business either now or in the near future, please don’t hesitate to either call or email us for an obligation free appraisal.