The minute you've established that a prospective buyer has high interest and the ability to buy your business, it's time to meet and begin serious discussions.

In the immediate future, it's still not the right time to bare the soul of your business. That will happen slowly and in phases, beginning with signatures on a confidentiality or non-disclosure agreement. Here's what to do, what to expect, and how to proceed during the steps you're about to take.

Step 1.

Host an initial meeting with the buyer.

Set the meeting without revealing your business identity. Meet in the office of your broker, if you're using one. If not, consider setting the meeting in your accountant's or attorney's office, possibly with your professional advisor or advisors present if your business sale is large or complex. (If location makes a face-to-face meeting impractical, conduct the meeting by phone.) If the buyer wants a professional advisor to attend as well, welcome the additional input as a demonstration of interest. Even if the buyer comes alone, however, simply by showing up the buyer conveys a level of interest that speaks louder than words. It's your job to be sure the meeting isn't just cordial but that it actually advances the buyer-seller interaction.

Reconfirm your initial impression about the buyer's interest and purchase ability. Restate the type and size of your business and your preliminary timeline. Also discuss purchase structure in terms of the buyer's required cash investment and the need for solid security if you're considering making a seller-financed sale. Probe the buyer's reactions and input. The buyer likely received your selling memo summary (without business identification) before the meeting. Refer to that document while you reconfirm and deepen your confidence in the buyer's interest and purchase capability before moving on to the next step. Otherwise, end discussions at this point by expressing thanks for the interest while explaining that the buyer's situation and your sale expectations appear not to match up.

Obtain the buyer's confidentiality agreement on a form your broker, if you're using one, or your attorney has reviewed and approved. Explain your need for agreement not to disclose confidential information obtained during upcoming discussions. If the buyer doesn't pledge confidentiality, end discussions at this point.

Share your selling memo. Once the buyer has agreed to confidentiality and convinced you of serious intentions and ability to purchase, share but don't release your selling memo. Give the buyer time to review it carefully without allowing him or her to take it from the meeting ¬- unless you are very confident of the buyer-seller match up and then only after numbering the memo and having the buyer initial every page. That way if copies of pages end up in the wrong hands you can trace them back to the copy you gave the buyer. If the buyer indicates reduced interest at this point, probe, address and overcome concerns or end discussions at this point.

Invite the buyer to tour your business. Before the initial meeting ends schedule a tour of your business to keep interaction moving along.

Step 2.

Present your business

Show your business only after inspecting and perfecting its physical condition, and during a time when it is active and impressive. For very small businesses where the tour may spark staff questions, consider an after-hours tour or be prepared to introduce the buyer as a colleague, associate or friend.

Describe and point out features of your business and its strengths and opportunities. Conduct the same kind of tour you'd provide to an industry or community VIP, showing how a customer experiences your business before going behind the scenes to provide an overview of how your business works. Encourage and answer questions and learn more about the buyer's abilities and concerns. Share information without revealing trade secrets, proprietary processes, or any information that should be kept from anyone but the ultimate buyer of your business. If the buyer indicates reduced interest at this point, probe, address and overcome concerns or end discussions.

Follow the tour with a private meeting to address buyer questions. The buyer likely will ask: Why are you selling? Where are the problems? What's the potential? Be ready to address the buyer's interests discretely without revealing inside information. Also, don't negotiate price at this point. If the buyer indicates reduced interest at this point, probe, address and overcome concerns or end discussions.

During the post-tour private meetings, learn more about the buyer. Learn whether the buyer has owned a business in the past; when the buyer is looking to complete a purchase, how long the buyer has been looking, how the buyer plans to fund a purchase, who else will be involved in the buyer's decision (for instance, a spouse, partner, banker or attorney). If the buyer's answers cause you uncertainty about interest or capability, address and overcome concerns or end discussions at this point.

Schedule the next meeting. Following the meeting, the ball is in the buyer's court, but you'll want to keep the game moving. Schedule a follow-up meeting. Until that time, offer to provide information the buyer may have requested, such as marketing materials, product samples, or other information that cultivate interest without divulging inner-business workings. If you sense that the buyer has lost interest or lacks the ability to pay the price you require (which is likely no less than 70 to 85 percent of your asking price), address and overcome issues or end discussions.

As you take the steps outlined in this chart, remember at all times that your buyer wants and needs:

  • A business that delivers immediate cash flow.
  • A going concern with an established infrastructure.
  • A strong financial condition backed by good historical data and financial statements.
  • A broad-based, loyal, and transferable client base.
  • A business that can be assumed with no transition hiccups

As you interact with your prospective buyer address the points above, realizing that buyers pay a premium for businesses with upward-trending revenues and profits and good future opportunity.

At all times, however, take great care to truthfully convey facts about the condition of your business, because after you receive a purchase offer and before the sale can close, you'll have to warrant the accuracy of the information you've provided.

In next week’s installment of “Selling Your Small Business” we’ll offer some tips on negotiating a purchase offer.

Editor’s Note: This article is the seventeenth piece in a series taken from’s Guide to Selling Your Small Business. The guide is a comprehensive manual to help small business owners maximize their success when the day to sell arrives. Each week, will publish a new section of the guide outlining’s best practices, from the initial planning stages of a sale all the way through negotiations and post-sale transition.