What You MUST Know About Potential Buyers
The day you have been waiting for has arrived… A potential buyer has made contact, and they want to learn more about your business. Whether it’s the first prospect to call or not, that feeling of excitement and possibility is palpable. But don’t let emotion squander a great opportunity with this call.
Hopefully you are working with a skilled broker who has already prequalified this person, already had them sign a non-disclosure agreement to protect you and your interests, and already has made sure that the person has the potential to be a good fit for your clinic.
But even if that has taken place, there are some essential questions to ask to further ascertain if this is the right buyer for your clinic.
But before we dive into the question list, here are some key points to remember as you talk to this person
The buyer obviously has a lot of questions they want answers on to see if this is a good fit for them- and it is vital you answer these honestly and enthusiastically. But your questions are equally essential, as you don’t want to waste your time, either. Make sure these questions are answered up front.
Try to ask open-ended questions and let them talk! You never know what will come out of their mouth- and if there are any red flags, note them. Depending on how big the flag is, maybe you don’t write this person off right away, but a written record kept with their other information will help you to revisit it later if you decide to move further into negotiations with them
How they say things matters. Watch for signs of nervousness, circular or vague answers, and guarded or evasive responses.
1. Are you qualified to run this business?
What is your business background?
Tell me about the practices you have owned before- why did you leave those?
Have you managed or owned a similar practice? What was the gross/net/# of new patients/# of patient visits? Business owners typically know these numbers, beware the doctor that doesn’t as it indicates a pretty hands-off approach to clinic management
If you haven't owned a business before, how long have you been thinking about buying a business?
What attracted you to this clinic?
2. Have you ever bought a business before?
GREAT question! If yes, you are in luck, you can get some significant insight into how this process will work with this buyer- plus working with someone who has purchased a business before should simplify the process significantly.
The key here is to follow up with ‘Can you put me in touch with the doctor(s) who previously owned those clinics?’
Talk about insight! Talking to a previous seller to the same buyer can provide info as to problems that arose during the sales process, unusual information requested during due diligence, how the transition went… In other words, you can learn all the ins and outs of dealing with this particular buyer.
3. What are your financing options?
It is completely acceptable to ask questions about how the buyer intends to finance the deal upfront. While you should not ask for any documentation at this point, you need to ask:
What is the down payment you have available?
Have you been prequalified by any lenders?
Are you intending to obtain commercial financing for the remainder of the purchase price?
Are you expecting any owner-carried financing?
4. What are the buyer's concerns?
This could be in regards to buying a practice in general or your practice in specific. Basically, this is something that it is better to get on the table and then address directly, but also focus on over and over throughout the sales process with this person. The way you word your responses to their questions, your actions, your negotiations, planning the transition- basically everything about how you deal with this person from here on out can be tailored to reassure them on the issues they are concerned about.
5. What would your ideal transition look like?
It's important to discuss both of your expectations about the transition process as soon as possible. These details can typically be negotiated pretty easily, but unstated assumptions can come back to haunt you. Find out now if there is something important they feel they need to successfully take over ownership of your clinic.
6. Do you have a partner or spouse who will be involved in the buying decision?
Save yourself a lot of time and duplication of information and effort- find this out upfront and include that person on all communications. You will thank me later!
7. Do YOUR due diligence
Let this person know that just as they will be doing due diligence on your business, you will need to do due diligence on any serious prospective buyers.
Start with “Have you seen your credit report lately? Any idea on the score? Did you see anything negative on it?”
Then follow up with “If we come to an agreement on terms and decide to move forward, I will want to check your credit, work and character references; is this OK with you?” And then pay very close attention to the words, tone and body language of the answer.
If you don’t feel comfortable discussing any of these items, as your broker we can have these discussions for you and/or facilitate the conversation. But ultimately, these essential questions must be asked before moving forward in the sales process. After all, life has enough headaches, there is no point in wasting your time with a buyer who will just never work out.