Buyer qualification tests whether an acquirer has the authority, funding, motivation and resources to complete a purchase. Check evidence early and revisit it as negotiations develop; initial interest or a cash claim is not proof of completion capability.
By Tony Vaughan · Published · Updated · Last reviewed
You will find many articles and opinions online about the rights and wrongs when selling your business. Clearly, there are many important decisions a business owner must take when looking to exit, these include: legal, accounting and tax considerations, preparing for the sale, your business value and deal aspirations and how you might find the right buyer, to name but a few.
Any business exit is firstly a and marketing process. A key principle of any sale process is to understand and create a buyer qualification procedure fit for purpose. A process that will help you determine whether any potential acquirer is a good fit or not for your business. Does the buyer tick all the key boxes of a genuine and motivated buyer? If not, move on!
Buyers come in all shapes and sizes, not all will be right or appropriate for your business. Your qualification process must be able to identify low scoring buyers so you can avoid spending valuable time and resources with a buyer who simply will never be able to secure the purchase of your business. You only need one buyer, qualify out the weak and focus on the prime targets.
Weak buyer qualification can contribute to wasted time and failed negotiations, but the proportion of failures it could prevent is not established here. Cash availability alone does not make a buyer suitable.
Any basic qualification criteria should include:
Buyer Authority
Are you dealing with the ultimate decision maker?
Need
Why are they interested in your business, is there a strategic angle or business opportunity?
Money
How will they pay for your business, if they require funding, is the lender the ultimate decision maker?
Timescales
What is their acquisition window, and do they have the resources to meet those timescales?
Experience
Have they completed a previous acquisition, and do they have an experienced team behind them?
Opportunity
Is there a good reason or compelling opportunity to acquire your business? If not, be concerned.
Policy
Does the buyer have to work to any strict rules or policies that might kill the deal?
It will seem obvious on reflection, but sellers and their agents can get quickly excited at the first sign of an offer, but this is the point where you raise the game and qualify hard. There are no quick fixes or short cuts if you want to do the job properly and secure a successful business sale.
A documented qualification process can help identify risks and prioritise credible buyers. It cannot eliminate financing, due diligence or completion risk.
Common questions
What funding evidence should a prospective business buyer provide?
Request proportionate evidence of available equity, proposed debt and financing conditions. Distinguish committed funding from indicative interest.
How can a seller check who actually approves an acquisition?
Ask who signs off the price, investment, borrowing and contract, and whether board, investor or lender approvals remain outstanding.
Does a buyer’s Companies House record prove it can afford the purchase?
No. Public filings help verify identity and history but may be dated and do not establish available acquisition funds.
When should a seller repeat buyer-qualification checks?
Recheck when the price, structure, funding or buying entity changes, and before exclusivity or substantial further disclosure.
Sources
General information from our archive, not personal advice.
Explore a related business sale question
Talk your options through in confidence
Understand your options before deciding. Enquiries are reviewed by experienced advisers who can discuss suitable options. Submitting an enquiry does not create an advisory engagement.
Request Your Confidential Review