How to answer THE most important question
Many business owners believe the act of selling their business is similar to passing the baton in a 400 metre relay: once the pass is made then you’re done and you get to relax. In reality, buyers may often insist that you stay on for a handover period – that could be anywhere from five days to two years – during which time you may be required to continue to work in the business to help the buyer make the most of the investment they have made.
So what is THE Question?
At some point, all buyers will ask you, often quite casually, “Why do you want to sell your business?” However beware, as these simple words often derail more deals than any others.
Buyers ask THE question to understand how likely and, more importantly willing, you are to stay on after sale or if you already mentally are heading 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. However, what they want to hear is your intention to help them realise the potential locked inside your business. The potential you are probably promising them is there!
Here are some suggested responses based on your age.
Under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in engaging with someone with their expertise:
“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 buyer brings to the table>.”
If you’re between 40-55 years old, most people will understand the need to shore up your personal wealth:
“I’ve reached a time in my life where I want to create some wealth from the value I’ve created so far, and at the same time I need to find a partner who can help the business 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 way off yet, but I want act early enough to ensure I can pass the business on, so that it thrives under new ownership.”
Practice your answer to THE question, so it is a natural response when you are inevitably asked THE question by a potential buyer.
Paul Dodgshon is a Regional Partner in The Business Partnership, who have been helping business owners sell their businesses since 1979. You can learn more about Paul and The Business Partnership here.