Proceeding With Caution: Buyer Red Flags

But how do you know which offers to put on your short list of potentials and which should leave you with cause for concern? Today, we will take a quick look at buyer red flags that should have you proceeding with caution.

Ultimately, money is what buys a business. But just because a buyer is seemingly willing to throw down big bucks for your life’s work does not mean that the money is there. Be on the lookout for:

• An unrealistic valuation. While your business broker has already created a valuation of your business, some buyers might wish to come in much higher to try to oust the competition. Although multiple offers might spur a bigger payday, be mindful that this could be an attempt to get you to ignore other offers and bring you to the negotiation table later on.

• Unproven funding. Your buyer should be able to prove that they have the cash or funding sources available before or shortly after making an offer. Having no clear financial arrangements is a red flag that your business broker will likely caution you to be wary of.

• Too many contingencies. Contingencies are part of the buying and selling process for most major investments. However, when your offer comes with a seemingly never-ending list of conditional clauses, this might indicate that the purchasing party is simply looking for an easy exit strategy.

• Excessive retention requirements. Many new business owners will ask that you stay on for a short amount of time to help ease the transition. Make sure that there is a clear-cut end date for this agreement so that you are not limited in your ability to move forward when you’re ready.

• Unclear terms. When the buyer submits an offer, their broker representative should ensure that the offer terms are clear. If not, it’s time to move on.

While this is not a full list of potential red flags to consider when selling a business, the above does underscore the importance of doing your diligence. When you’re working with an experienced business broker, they can help you spot these types of potential issues so that you can sidestep unqualified (or unscrupulous) buyers and enjoy a seamless selling experience.

When you are ready to sell, contact Russell Carriere at First Choice Business Brokers. I am ready to find you a Buyer that meets the criteria you are looking for when selling your business.