Buyer Quality vs Quantity

The Alberta Business Exchange Eliminates Tire-Kicking Through Its Custom Qualification Process

During my formative years as a Business Broker, I spent a lot of time talking to buyers. In fact, two or three hours of every day were dedicated to spending time with people interested in purchasing a business. The problem was that there were an incredible number of tire-kickers – people who wanted information on a business, but were in no way qualified to buy one. Not being able to spot a tire kicker could cause a confidentiality nightmare for a vendor considering they might invest weeks or even months to working out a deal only to discover the tire kicker either had no intention of actually buying the business or was unable to do so financially.

I remember a well-educated, professional gentleman who had looked at a number of different deals over several months. When he finally made an offer on one, I couldn’t believe what he’d come up with. His offer was well below our valuation and represented virtually no risk to him. I fired him as a client and never let him look at another deal – lesson learned.

So, over the years, I have developed a qualification process to separate the wheat from the chafe and protect the release of confidential information on businesses for sale.

Working in conjunction with a psychologist, I created a buyer profile questionnaire that goes along way to determine if an interested buyer is qualified. If they’re not qualified, they don’t get the information they’re after.

Generally speaking, one of the most important things in the process is the buyer’s willingness to come to my office to be qualified. If they don’t have the time to do that, they don’t have the time to buy a business.

And then there are those qualified buyers who don’t even know there’s a fitting opportunity out there for them. We once had a client selling his engineering firm. We felt that the qualified buyer would be a male aged 35 to 45, he would be an engineer and would have at least $250,000 in cash to invest in the business. It was time to get creative. So, we got a directory of engineering graduates from the appropriate years and directly marketed the business to those individuals. It wasn’t long before we sold the business to a qualified buyer.

In our qualification system, the vendor directs confidentiality and we manage it.  That means the vendors ultimately control who has access to information about their company. They may wish to be notified if a direct competitor is interested, or they may want to know something about every potential buyer. The value we offer is that their time won’t be wasted with unqualified buyers. Having an unbiased third-party handle the deal also eliminates a lot of the
tension, inefficiencies, and mistakes that can happen when buyers and sellers work directly together.

The qualification of buyers is a sophisticated process that involves experience, intuition and expertise.

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