Spotting Serious SLC Business Buyers: Red Flags to Look Out For

In part one of this two-part blog series, we went over some of the positive signs that a prospective buyer of your business is serious about their interest. Finding serious buyers is an important part of the process of selling any business, and knowing how to spot their signs is always good.

At Utah Business Consultants, we're happy to assist clients with a huge range of services to help you sell your business in Salt Lake City, including assessment and identification of quality buyer candidates and numerous other areas. In today's part two of our series, we'll look at the flip side of this coin: Some telltale signs that a prospective buyer for your business isn't serious, and in some cases may even be looking to scam or otherwise take advantage of you.

serious business buyers red flagsRefusal or Inability to Provide Basic Financials

Viewing the financials of any prospective buyer is a totally standard part of the business sale process, so any prospective buyer that refuses to show you their financials is exhibiting a pretty severe red flag. A typical deal will involve share price negotiations, and your business most likely has basic information with respect to how much the buyer is willing to pay for shares of stock in the company on display in their public filings with regulators like the SEC.

However, if a prospective partner refuses to show you other details, such as revenue figures, profit margins, cash flow projections and other basic elements of their financials, you should be very cautious. Some buyers will even be so bold as to provide fake numbers for these purposes in an attempt to defraud or otherwise game the negotiation process for their own benefit.

False or Misleading Statements

In other cases, you'll spot the signs of a non-serious or even potentially fraudulent business buyer by catching them in a lie. For example, if they tell you that their company has huge annual revenue before showing you more accurate numbers, this may be a warning sign. They might claim to have millions of dollars in the bank without evidence, or provide information about their business operations that doesn't check out with other sources.

Stories About "Creative" Purchasing Methods

While certain legitimate buyers may ask questions about cash required up front and similar purchasing methods, be wary of those who ask about methods like notes, the seller co-signing a loan with the buyer, or similar methods. These should be completely unnecessary and transparent to you unless there is a specific reason that the buyer requires such additional information.

"Creative" financing or purchasing arrangements are sometimes used as a means of defrauding prospective business sellers, and many unethical buyers will attempt to convince you to use these types of tactics when they know it's not a good idea. This is one area where working with our team of experienced business brokers will help you avoid all such risks, as they've seen every example of this.

For more on the signs that a prospective business buyer for your company isn't entirely serious or may even be looking to defraud you, or to learn about any of our exit planning or business sale services in SLC or nearby areas, speak to the team at Utah Business Consultants today.

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