Checklist for Qualifying Internet Business Buyers
So, you are thinking of selling your internet business. You understand the importance of exit strategy planning. You are excited to learn that good internet businesses can be sold quickly.. You have carefully analyzed your financial statements and calculated a fair market value for your business. You understand the difference between opportunity and potential offered by your business offered by your business, and you have resisted the temptation to inflate your expectations of its value. You have done everything you can to prepare for the sale and to maximize the selling price of your website. You even know what kind of competition is out there, and you understand the competition is out there and you understand the top 12 factors that buyers look for while comparing between many available internet businesses for sale
Yes, you have put your house in order, you have done all your homework, and you are ready to open your doors to business buyers. But one critical question remains: Are the buyers ready for you?
You know there are many different types of buyers in the marketplace, from first-time entrepreneurs to sophisticated multinational corporations, and you know you certainly don’t want to share detailed and sensitive information about your business with just anyone who asks for it — particularly not with current or potential competitors. But you also know the more buyers who are interested in your business, and the more that you share, the better your chances of a successful sale at a higher price.
So, what do you do? It’s a real conundrum, and many of my clients struggle with balancing the conflicting goals of maximizing exposure and maintaining business confidentiality. To address this issue, I always recommend my clients use a two-tiered, gated approach for attracting and vetting potential buyers.
Use a Two-Tiered Gated Approach for Identifying Serious Buyers
Think of Gate 1 as a public area that’s open to most buyers, packed with tantalizing information that celebrates your business’s strengths without revealing too many restricted or classified details about your operations. At the same time, this is your opportunity to collect some initial data from your prospects that will enable you to better judge their qualifications and their intent.
Prospects from Gate 1 who pass your criteria (see the checklist below) can then be introduced to Gate 2. The intent of this stage is to give the buyer a full understanding of you and to give you a full understanding of them. Gate 2 prospects will be given the most comprehensive documentation about your business, but you will also have the ability to learn more about each buyer. This usually entails direct contact with the prospect, such as phone calls or document exchanges, allowing each party to become comfortable at the prospect of a completed transaction.
The best feature of the tiered approach is that it entertains almost everyone interested in buying your business while still protecting your interests. Gate 1 ensures that you won’t miss or accidentally turn away any interested buyers (maximizing exposure), but Gate 2 allows you to continue working with only a subset of trustworthy and motivated prospects (maintaining business confidentiality).
Gate 1 Checklist: Questions to Ask the Buyer During the Initial Qualification Process
(1) Please describe what would constitute an ideal business for you.
(2) How long have you been looking for a business?
(3) What is your timeframe for purchase (e.g. how many months)?
(4) What price range of businesses would make an ideal acquisition for you?
(5) How much of a down payment are you comfortable with?
(6) Is a down payment available today?
(7) Please describe the source(s) of your down payment.
(8) What is your yearly net take-home expectation from a new business?
(9) What is your present net worth?
(10) What do you do currently? Do you work? Do you own a business? Both?
(11) Please describe your business experience (e.g. corporate manager, private entrepreneur, etc.).
(12) Please describe your education and background.
(13) Are you open to non-internet businesses also? If yes, in what geographical region(s)?
(14) Are you currently involved in any web-based activities, either for work or for your own business? If yes, please describe what you do and provide any relevant links or URLs.
Understanding Gate 2
The checklist for Gate 2 is very subjective and is based on the seller’s goals. Every business is unique, and Gate 2 is the place to cover the special circumstances that make you different. Your broker can help you create a full list, but remember that no one knows your business better than you. Gate 2 questions should ultimately cover the topics you think matter most.
For example, I recently closed a transaction with a seller who owned his own warehouse. His preference was to sell the business to a local buyer who would be willing to rent the warehouse from him. Other clients who have close ties to their employees often stipulate that the buyer retain all or some of the existing staff. Some clients, meanwhile, require the buyer to continue certain marketing styles, business practices, or to agree not change the focus of the business for a set length of time in order to ensure a smooth transition.
My recommendation: Make your Gate 2 questions count, but keep as few criteria as possible. And if you meet a prospect that passes Gate 1 with flying colors but fails many of the criteria you’ve set for Gate 2, I suggest you still keep them on a “hot prospect” list. Unless you have many strong prospects, you don’t want to dismiss any Gate 1 graduates out of hand.
Gate 2 Checklist: Questions to Ask Yourself Before You Ask the Buyer
(1) Are there pieces of property, inventory, or equipment that need to be included in the sale that might not be obvious from initial discussions (e.g. warehousing units, delivery vehicles, etc.)?
(2) Are there any relationships your business maintains that need to continue after the sale (e.g. retain employees, retain particular vendors, maintain special discounts or arrangements with preferred customers, etc.)?
(3) Do you require the buyer to have any special skills that will help ensure the continued success of the business (e.g. a working knowledge of SEO, experience in your industry, etc.)?
(4) Do you plan to continue working in the industry after the sale? If yes, is the potential buyer OK letting you do that ?
Using these checklists to come up with the right questions to ask is great, but getting potential buyers to answer them is a different story and isn’t always easy. In my next post, I will cover some of the challenges sellers face in getting answers to their questions, and we’ll review some effective strategies for overcoming them. I’ll also go over some tips on what types of information to give to your prospects, and when.