8 Questions You’ll Be Asked When Selling Your BusinessPosted: February 5, 2013
With almost 40 years of business experience and the last decade providing coaching and business advice to small and medium sized businesses, what I have found is that one of the most intimidating aspects of selling your business can be facing the barrage of questions you’ll be asked by potential buyers.
Being prepared to be asked about all facets of your operations is key to selling your business, so I would like to share with you the top eight questions potential buyers want to know about your business.
1. Why do you want to sell your business?
We addressed this question in our blog post last week, and it is worth reading for a more detailed answer. Basically, it’s a slippery question because if your business truly does have a bright future—and you want the buyer to believe that’s the case—the obvious question is: “Why do you want to sell it, and why do you want to sell it now?”
2. What is your cost per new customer acquired?
The potential acquirer wants to find out if you have a predictable, economical and scalable formula for finding new customers.
3. What is your market penetration rate?
The acquirer, with an eye to future growth, is trying to understand how big the potential market is for your product or service and what part of the field remains to be harvested.
4. Who are the critical members of your team?
The acquirer wants to understand the breadth and depth of your team and determine specifically which members need to be motivated and retained post-purchase.
5. Who buys what you sell?
Strategic buyers will be searching for any possible synergies between what you sell and what they sell. The more you know about your customer demographics, the better the buyer will be able to assess the strategic fit. If your customers are other businesses, a buyer will want to know what functional role (e.g., training manager, VP of sales and marketing) buys your product or service.
6. How do you make what you sell?
This question is asked in an effort to size up the uniqueness of your formula for creating your product or service. Potential buyers want to know if you have any proprietary systems that would be hard for a competitor to replicate. For various reasons, they will also want to understand if the creation of your product or service is dependent on any one person.
7. What makes your product truly unique?
A buyer is trying to understand how big the moat is around your business and what kind of protection it offers from competitors who may decide to compete with you in the future. What have you done to safeguard yourself against the competition?
8. Can you describe your back-office setup?
Most buyers will try to understand how easily they can integrate your back office into their operation. They’ll want to know what bookkeeping and billing software you use, how customers pay, and how you pay suppliers.
Although there may be hundreds of questions potential buyers might ask, if you can answer these eight, you’ll have a good start when you’re preparing to represent your company.
How About You?
If you are preparing your business for sale what types of questions have you been asked by potential buyers? What would you say is the number one question you have been asked by an acquirer?
I look forward to hearing your stories in the comments below.