How To Sell Your Small Business - Managing Contact With The Buyer - Part 2

Continuing on from yesterday's post about supplying information to the buyer while protecting your confidentiality.

Sometimes you will get requests for information from a very good buying prospect that you just can't fulfill. For example, after he receives your Selling Memorandum, the buyer may request to see a list of your customers or suppliers.

You must determine why the buyer wants this very specific information. Does he want to steal your customers from you? Or perhaps (and more likely) the buyer wants to see if you are overly dependent on one customer. If 80% of your revenues come from just one or two clients, that is a legitimate red flag that would concern any buyer.

But your prospect doesn't need a complete list of you customers along with contact information to find this out. Instead, you can prepare a report that shows what percentage of your revenues comes from each customer (or the top 10 or 20 customers if that's more appropriate).

So, whenever a buyer makes a request for an entire category of information, don't flatly refuse. Instead, try to figure out the buyer's specific need or concern and then provide just enough information to satisfy that need.

In addition to the names and contact information of your customers and suppliers, information that should be off limits until a buyer signs a Letter Of Intent should include all proprietary information regarding your manufacturing processes, blueprints, recipes, product diagrams.

Remember: Only one of your prospects will end up buying your business. But all the other prospects will still posses whatever information you give them after they drop out.

So a good question to ask yourself when deciding whether or not to provide certain information to a prospect is:

If this person does not buy my business, could they use this information to harm my company's value or the success of the new owner?

If a buyer absolutely insists that you provide a certain piece of information that you are uncomfortable providing, you have three choices:

1.) You can flatly say "no" and risk losing him as a prospect.

2.) You can give him the exact information he asked for

3.) You can prepare a report that provides just the information you are comfortable revealing and hope that it will satisfy the buyer's need.

Exactly how you handle a situation like this will depend on the quality of the prospect who makes the request.

You should rank all your prospects according to their qualifications and desirability - Which prospect do you want to take over your business? You may decide to give that prospect much more detailed information than the buyer at the bottom of your list.

But whatever you decide, make sure that the buyer understands you are not trying to hide anything. There is certain information that you are uncomfortable releasing now, but that once the buyer has submitted a Letter Of Intent he will have complete access to your business.

Moving Forward

Gradually some buyers will eliminate themselves from consideration. Others, you will eliminate due to a lack of agreement on the issues surrounding the sale.

But if a well-qualified prospect is interested after reading your selling memorandum and have had their questions answered, you will want to set aside an hour at night or on the weekend and talk to your prospect over the phone about the specifics of the possible deal. In addition to the price you may want to discuss:

•Down payment and other financing terms.

•Your future employment with the company

•The future of key employees with the company

•Any assets that will be removed from the company by you at the close such as a company car

•A non-complete clause

The next step is for the prospect to visit and tour your facility.

You should reserve the privilege of an on-site visit for only the most qualified and interested of prospects.

Site visits are time consuming to prepare for, may be difficult to schedule and have the potential to unnerve your employees.

Buyers will often want to see the business immediately. Buy you will want to do as much as possible with the buyer via e-mail, phone and through your well prepared Selling Memorandum before the prospects visits.

If the buyer isn't enthusiastic at this point there is no need to go through with a site visit.

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