It goes without saying that business sellers and buyers see things from an entirely different perspective. For you as the seller, your business is your “baby”. You have put in countless hours over the years (and in many cases, decades) building it from scratch, making it a profitable enterprise, and bringing it to a point where it provides a good living for you and your family.
From the perspective of the buyer, however, you are just one of several businesses they are likely considering. Buyers have no emotional attachment to your business; all they want to know is whether or not it is a good investment for them. More specifically, they want to know if they can afford to buy it (or will be able to obtain financing), the risks involved in making this investment if they have the skills to successfully operate the business, and if it is likely to continue producing a comfortable income.
When you discuss your business with a prospective buyer, you can expect to field several questions, many of which will depend on your specific circumstances. Here are seven of the most common questions a buyer might ask:
- What was your reason for getting into this business in the first place: The buyer wants to know what excites you about this business and what you are most passionate about related to your organization and industry. This question is an opportunity for you to get them excited about your passion as well.
- What is your present role in the business: The main reason for asking this question is to determine what the business might look like when you are gone. They will want to know if you are replaceable and/or what it will take for the company to continue operating successfully without you.
- Are you willing to stay on with the business in any capacity after the sale: Along the same lines as the previous question, the buyer will want to know what type of post-sale support (if any) you are willing to provide. Hopefully, you are, at the very least, available as a consultant for at least 30 to 60 days after the sale. If you are able to stay even more involved, that might be an attractive incentive for the buyer to make a purchasing decision.
- What does your company do best within the marketplace: The buyer will likely ask a variation of this question to determine your unique selling proposition; that is, what value you provide customers/clients that are unique to your firm and they cannot obtain from the firm down the street. The buyer will also want to know if your value proposition is largely dependent on your involvement, or if it can be maintained after you are gone.
- Who are the key members of your organization, and what are their roles: Other than you, the buyer wants to know the important people in your business and what they do. It is also likely they will ask follow ups to this question to determine how long they have been with the company, the level of loyalty they have to you, and whether or not they will remain with a new owner.
- What have been your greatest internal and external challenges, and how have you dealt with them: Every business has challenges. The buyer will want to know what yours have been and how you were able to overcome them. Part of their thinking in asking this question is whether or not they could have faced these challenges like you have, and if they will be up to future challenges as the business progresses.
- What are the greatest opportunities for growth within the marketplace in the next 1, 5 and 10 years: Nearly every buyer comes in with the idea that they can improve and grow the business, making it more profitable and allowing them to sell it for a nice profit someday. This is your chance to show them how they can capitalize on emerging growth opportunities in your industry.
As you prepare to sell your business, it is important to address these and other frequently asked buyer questions. To ensure that you are ready to sell and have strong answers to these questions, it is best to work with a reputable business broker. A business intermediary, particularly one who has experience with businesses in your industry, can leverage his/her expertise and provide the preparation you need to ensure a successful sale.
Written by Ryan Gipple