Planning to Sell? How to Answer THE Most Important QuestionPosted: January 28, 2013
At some point in the process of selling your business, a prospective buyer will ask you – usually quite casually – “Why do you want to sell your business?” As a business advisor to SMB owners, I have personally seen these eight seemingly innocuous words derail more deals than any others.
Why? Although THE question might seem to have a straightforward answer it needs to be more strategic than you might think. Buyers want to know where you are at in the selling process, what your motivation is and how likely and willing you are to stay on and if you already have one foot out the door.
Obviously you don’t want to lie, but there is a right and wrong way to answer THE question. Answers like “I want to slow down a bit” or “I want to travel” or “we’ve got a baby on the way and I want to spend more time at home” communicate to a potential buyer that you plan on winding down when they take over.
Knowing that what they want to hear and how to provide them with an answer could mean the difference between selling your business and a possible derailment of the deal.
I have outlined below a few suggested responses to THE question which will allay their fears that you plan to sell your business and move on as well as solidify help them realize the potential locked inside your business. I have outlined my tips based on your age as age does play a role in the selling of your businesses.
If you’re under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in merging your business with theirs:
“In order for us to get to the next level, we need to find a partner with more <insert sales people, distribution, geographic reach, capital or whatever the partner brings to the table>.”
If you’re between 40-55 years old, most people will understand the need to shore up your personal balance sheet:
“I’ve reached a time in my life where I want to create some liquidity from the value I’ve created so far, and at the same time I want to find a partner who can help us get to the next level.”
If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business.
“I’m at a stage where I need to start thinking about retirement. It’s a long way off yet, but I want to be proactive.”
Rehearse your answer to THE question so it becomes a natural response when a potential buyer inevitably asks you THE question.
How About You?
I am always interested in hearing from you. Have you been asked THE question? Do you have any other suggestions for responses that you have personally tried?
I look forward to hearing your stories in the comments below.