Questions You'll Be Asked When Selling Your Business
One of the most intimidating aspects of selling your business can be facing the barrage of questions during the various meetings you’ll be having with potential acquirers. Get ready to be grilled on all facets of your operations. Of course every meeting will be different, but here are some common questions you can expect to be asked when you’re in the hot seat:
1. Why do you want to sell your business?
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 do would 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-acquisition.
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., owner, 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.
Of course this is not an exhaustive list, but it’s a good start when you’re preparing to present your business to your potential buyers.
And even if you don't want to sell - we believe that every owner should have a sellable business. Life happens, and most owners wait until there is a pressing need in their life before they start to consider their exit plans.
Plus, the same things that make a business sellable are the same things that make a business fun to own!
76% of business owners regret their exit after just one year.
That shouldn’t happen to you. Contact us to talk confidentially about your exit plans.