The first face-to-face meeting between a buyer and seller is one of those ‘make or break’ meetings. The best way to prepare for it is to think of this meeting like a first date. The dynamics are very similar. You’ve spoken on the phone and emailed, and now there’s enough interest that you both want to meet. Like a first date, the goal here is to get to know each other. I recommend you do the following three things to ensure this meeting goes as well as possible.
Preparation
Preparation involves three key steps. First, have a plan for the meeting. Decide where and when you will meet, whether during business hours or after hours. Determine who will attend from your side and whether you want to have handouts or a formal presentation. Consider if you will serve refreshments or snacks. Know who the buyer is bringing to the meeting and whether you will give the buyer a tour of your business. Ensure the business shows well or do some housekeeping before buyers visit. Decide if it makes sense to give buyers samples of what you make or sell.
You should determine these things, not the buyer. Once you have a plan, send it to your buyer. Buyers need to understand how your sales process works and what is expected of them during each step of the process.
Determine your Desired Outcomes Ahead of Time
The primary goal of this initial meeting is to show the buyer that everything you said about your business in the offering memorandum was accurate, so they have enough confidence in you and your business to submit a purchase offer or Letter of Intent (LOI). However, you may also have several other goals as well. Below is a list of some typical secondary goals:
Confirm the buyer’s financial qualifications by asking questions like how much money they have available to invest, the source of these funds, their discussions with potential lenders, and their credit score.
Confirm the buyer’s business experience by asking questions like, ‘Tell me about the other businesses you’ve owned,’ or ‘Tell me about your previous business management experience.’
Confirm the buyer’s interest in your business by asking them what they think about your business, how it compares to other businesses they’ve looked at, and if it fits what they were looking for.
Assess the buyer’s character. It’s important to sell your business to someone you like, respect, and admire. Chances are, if you like the buyer, so will your employees and customers. Trust your gut—if something doesn’t feel right about the buyer, it probably isn’t.
Determine the buyer’s timeline. Business brokers often say, ‘Time Kills All Deals,’ and it’s true. Another important goal is to determine how quickly a buyer is prepared to move and if their timeline aligns with yours.
Have an Agenda
Preparing an agenda ahead of time will help ensure that you accomplish your goals for the meeting. A sample agenda for a successful buyer meeting might look like this:
Introductions & Welcomes – 10 minutes
Buyer Background: Ask the buyer to describe their background, experience, and why they are looking to buy a business – 10-15 minutes
Seller Background: The seller describes how they got into the business and why they are exiting – 10-15 minutes
Business Update: The seller gives the buyer a summary of how the business has performed since the offering memorandum was prepared and provides the buyer with a current year-to-date P&L statement – 10 minutes
Q&A: The seller answers any questions the buyer has – 15-30 minutes
Tour: Give the buyer a tour of the business and continue to answer questions throughout the tour – 15-30 minutes
Buyer Feedback: Return to your office or conference room and ask the buyer what they think. Discuss what they like and what they didn’t like. Get a list of any additional information the buyer would like from you – 10-15 minutes
Next Steps/Action Items: Tell the buyer your timeline and, if they are interested, the next step is for them to submit an offer or Letter of Intent. Determine if they plan to submit an LOI and, if so, when they plan to do it – 10-15 minutes
Of course, this is just a suggestion. Feel free to modify it to suit your particular situation. However, please note that the entire meeting is designed to last between 1 1/2 and 2 1/2 hours. Try to keep the meeting to around 2-3 hours, max. Sometimes, the chemistry between a buyer and seller is great, and the conversation can continue for four or five hours, but I don’t recommend it. If that’s the case, I suggest scheduling a second meeting rather than letting the first meeting go for more than three hours.
Asking and Answering Questions
Now that you have an agenda, the next step is to prepare a list of questions you want to ask the buyer. Keep this with you during the meeting as a reference so you don’t forget any of your questions.
When responding to a buyer’s questions, try to only answer the question asked. It’s best to keep your answers factual and avoid sharing long stories or going off on tangents about things the buyer didn’t ask about. For example, if a buyer asks what your Average Days Receivable is, just answer the question. Don’t tell a story about the one customer who refuses to pay within 30 days and often stretches you out to 190 days, so you told him he now needs to pay in full when he places an order.
Building a Positive Relationship
It goes without saying that you should do everything possible to keep the meeting polite and respectful, avoiding any discussion about politics or religion, which can often be hot points. Nothing builds a more positive relationship than truth, so make sure all your answers are truthful, accurate, and complete. While you are trying to sell your business, you don’t want to come across as a salesperson. Let your business sell itself. The best way to do that is to be as real and honest as possible.
For example, if a buyer asks who your competitors are, be truthful. Every business has some level of competition, so don’t pretend that your company has none. This will simply make the buyer skeptical and wonder what else you may be fibbing about.
One last word of advice: Be sure to do your homework on the buyer ahead of time by asking them to send you a copy of their resume before your meeting. That way, you can do a Google search on the buyer and the companies they’ve owned or worked for, so you can assess during your meeting how truthful the buyer is being with you.
If you follow this advice, you will greatly increase the odds that your first meeting with a buyer will accomplish all your objectives.
Contact Jim Bates to learn more about strategies for buyer discussions.