When buyers are looking to purchase a business in Chicago, the most important step is to perform their due diligence when it comes to researching the business and the seller. A large percentage of sellers, however, fail to do the same by investigating the buyers.
The process of working with a prospective buyer can have challenges and disruptions. Deals fall through all the time, costing both parties a tremendous amount of time, effort and resources. Sellers often lose money during this process, but if you know what “red flags” to look for ahead of time, you can avoid potential disruptions and make sure the process of selling your business in Chicago is easy and smooth.
Selling your Chicago business? Here are a few key questions you will want to ask a potential buyer:
-What other businesses have you considered, if any?
-How much equity will you be committing?
-Do you have any experience in this specific business, niche or market?
Warning signs you should look for when dealing with a buyer
It’s imperative to look for these red flags early on in order to avoid wasting time and money. Here’s what to look for:
Lack of communication
Poor communication from a potential buyer could mean lack of commitment and seriousness about purchasing your business. An interested buyer will make sure you know they’re interested! If there is little communication, “flakiness” or lack of interest, it could indicate the buyer changed their mind or was never serious to begin with. It’s best to move on and explore other options in this case.
The buyer delegates the process to someone else
Another potential red flag is when the process becomes turned over by the buyer to a junior member of their team. A serious buyer will likely want to be involved and invested in the process. Make sure you’re clear on the buyer’s intention with the business and that those intentions align with yours.
Failing to provide details (especially financial)
If the prospect fails to provide key information, especially information regarding their financial capabilities to complete the deal, this is definitely a red flag. You want to make sure you have a buyer who is invested fully in the process, willing and able to provide the necessary information to ensure a smooth process.
If any of these red flags pop up, reach out to the prospective buyer and ask to meet in person to discuss the situation.
Trust your intuition during the process – if you feel that a potential buyer isn’t fully committed, is simply window shopping or has unrealistic expectations of the type of deal to be made, simply move on. It’s better to cut your losses earlier and free your time and energy for buyers that are a better fit.
It’s not done until it’s done!
Warning signs can present themselves during the entire buying and selling process, especially just prior to closing the deal. Pay extra attention if:
- the attorney representing the buyer is inexperienced or overly aggressive
- there are multiple requests for last minute changes
- communication falls out the as closing the deal approaches
A potential remedy for these situations is to get your own attorney involved to come to a resolution that works for anyone.
The process of selling your business is bound to have some challenges, but being able to spot warning signs early on can help keep everything on track and working as smoothly as possible. Working with a business broker in the Chicago area is an excellent way to not only spot the red flags, but be able to respond appropriately.
If you’re ready to sell or buy a business in Chicago, click here to contact us. We’re here to help make the process easy and make sure all of your questions are answered.
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