Back to Blog
by Dave Swartzendruber
As a business owner, your business has consumed the majority -- if not all -- of your time. It’s made of your dedication, your employees, your stories, accounts won and lost, systems and process, and so much more. So, when a potential buyer comes along, who will evaluate your business through a far different lens than yours, their emotionless questions can be jarring. And, whether you work with a broker or not, your buyer must decide whether to bid based on the answers you provide to their questions. To do that, you’ll have to be prepared.
Unless you’re being rolled into a larger company or dismantling individual assets, you’re essentially selling the present value of future cash flow, an imperfect estimation based on both objective and subjective factors. A buyer must decide whether to bid after careful examination of both negative and positive aspects. Depending on structure and interests, what’s negative to one buyer may be positive to another (e.g., existing non-owner management, real estate). You won’t be a good fit for everyone, and that’s OK, but you’ll still need to be able to answer the questions. Keep in mind, these questions are not even close to the due diligence questions we’ll discuss in another blog posting.
Decades of experience tell us that, in initial calls, buyers are trying to determine the following:
Knowing what to expect is half the battle. In addition to the obvious questions surrounding financials, here are 10 questions you’re very likely to hear:
1. Why are you selling your business and why did you get into this business in the first place? What excites you about it?
2. Can you describe your management team’s strengths and weaknesses? What problem does your company solve? Why do your customers choose you over your competitors?
3. Walk me through the entire process of your service/product line. What are your company’s competitive differentiators?
4. What is your day-to-day role in the business?
5. What would your ideal transition look like? What do you want to do post-sale?
6. What are your expectations of a buyer?
7. Other than you, who are the leaders/executives in the company? What are their current and potential roles? When a problem arises, who deals with it, and how?
8. How long have your employees been with you? Why do they stay (or leave)?
9. What capital expenditures are made annually in this business, and on what?
10. What opportunities exist in this market through the next 3, 5, 10 years?
Whatever the question, be honest. The truth will come out in due diligence anyway, and little white lies have an uncanny ability to end negotiations. Plus, your business deserves the right buyer, and you deserve a peaceful exit. Honest responses to buyer questions will produce both.
Selling a business is a huge and meaningful transition, and no one article or list can do it justice. As you prepare for the journey, reach out to us for assistance. Together, we can make your transition a successful one.