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Buyer Profile

Tags: buyer representation, buying a business

Comments & Replies: 3     Views:     Post ID:     Comments About This Glossary Term

A recent BizBen discussion considered the topic of how a buyer can compete successfully with other potential buyers for a seller's attention and acceptance. Certainly a professional, comprehensive, informative buyer profile gives any seller the confidence that THIS potential buyer is serious and worth paying attention to. Buyers should heed the advice in this thread, and sellers should look seriously at the offer that may be a bit lower but comes from a buyer who has established his seriousness and commitment to sound business practices by investing the time and effort in preparing a sound buyer profile.

Contributor: Business Broker, Northern California
All buyers want to get full disclosure of the business they are buying. A motivated and prepared buyer will present themselves professionally to encourage the seller to take them seriously.

A motivated buyer should have prepared:

1. A resume to show their business and especially their management experience.

2. Their credit score if they want a seller to carry some finance.

3. A copy of their credit report to show, hopefully, how clean it looks.

4. A personal financial statement to show their net worth and that they know how to handle money.

5. A copy of a bank statement to show they have a down payment available to buy the business.

Just as business buyers want to see a profile of a business opportunity being considered as a possible purchase, the seller of that business wants to know pertinent information about the potential buyer. That's where a well-prepared buyer profile comes in handy. The smart buyer, armed with a buyer profile and a personal financial statement[BS1] stands a better chance of getting the attention and cooperation of the most active business sales intermediaries as well as the sellers of desirable businesses.

Somewhat like a resume, the buyer profile reviews the individual's background, jobs held, duties performed, and some key projects successfully managed. The document also should explain, in some detail, the buyer's interests and requirements. What kind of business does he or she want to purchase? Is the buyer ready to manage workers who have limited skills, such as employees in a fast food business, or a staff of trained workers in, for example, an auto repair garage, sales organization, gourmet restaurant or other business with employees who are professionals in the product or service? What locations: states, cities or neighborhoods would fit the buyer's requirements?

A paragraph about financial requirements is a critical part of the buyer profile. The buyer needs to let business intermediaries and sellers know the range'in dollar value'of businesses that will be suitable. And this is the place to list the amount of income expected for the buyer's investment. These business requirements help to alert people examining the profile about the appropriate price range for a target company.

The buyer's financial ability also is an important factor in determining the right price range. A review of financial capabilities in the buyer profile needn't go into much detail. That's the purpose of the personal financial statement. But there are at least two figures that should be noted: the amount of cash the buyer has for a down payment and to fund working capital, and the buyer's equity in real estate or other assets that might be available for loan collateral.

Including the financial information, incidentally, often demonstrates whether or not the buyer is realistic in the search for a business - if the money he has to work with bears a reasonable relationship to the size of the business requested. If it does, that will encourage business sales intermediaries and sellers to work with the person submitting the buyer profile.

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