Selling a small/medium sized business: What questions to expect

If you are planning on selling your business you need to be prepared for a lot of questions from potential acquirers. It is important for them to understand every single aspect of your business, even things that you think are insignificant will be of great importance to them as they are the one making an investment. Whilst not every person you meet will grill you at such an intensity, it is important to be prepared for anything. Here we have compiled some of the most frequently asked questions that you might not yet have a straight answer to.

Why are you selling your business?

This is the most basic but fundamental question that you will be asked and you should trust that it will be asked. Depending on your circumstances, it can be the most difficult question to answer as if your business is as bright and booming as you are undoubtedly claiming it is, why would you want to sell? Ultimately if you don’t have a well thought out answer to this it is probably the first and last question they will ask you.

Do you have a Formula?

Any business owner knows the key to sustainability and potential growth is having a formula to find new customers that is predictable, economical and scalable. Without this, an acquirer is likely to see your business as risky with low potential and unless they are willing to put a considerable amount of time into restructuring they are unlikely to invest.

What is your market penetration rate?

Understanding the market is key to future growth and this will be an important question in the mind of any acquirer. They will want to understand the size of the potential market for your service/products and how much of this market is left to be tapped into.

Who in your current team is crucial to the business?

A business is only as good as its workers so any acquirer will want to know who everyone in your team is and what role they fulfil. If they are to take on your business they will need to know who is an integral part of the day to day workings.

Who is your demographic?

Acquirers more often than not already have businesses of their own and if they are being strategic about their purchase they will be exploring any overlaps of what you provide/sell and what they do. The more you are able to explain about your customer demographic the more they will be able to understand all of the ways in which the two businesses could complement one another. Equally, if your market isn’t within the general public and your customers are businesses, they will want to understand what businesses and specifically what sector purchases your goods/services.

How are your products/services created?

This question will help an acquirer understand how unique your products or services are in terms of the processes involved in creating them. If it is a process very unique to your business and brand then it makes you a lot more desirable as competitors would struggle to replicate it. They will also ask because it is important to know who exactly your business depends on for to produce these products/services.

What makes your business stand out from competitors?

Understanding how unique your business is in comparison to your competitors is key to predicting its future. They will want to understand what exact measures you have in place so that you won’t suddenly be overtaken by the competition.

Can you describe your office set up?

Buyers do not want to waste their time trying to understand the office set up you have left them once they take over. It is important you have a clear and concise answer of how you operate in terms of bookkeeping, any software you use, means of data storage, how invoices are paid from customers and to suppliers. These are all extremely important and ideally you will have a simply understood structure in place for all of this.

Whilst this list is only a handful of questions you may be asked, they are still questions that you might not have considered before especially when you are caught up in the logistics of trying to sell. Regardless, with these in mind you should be better prepared to answer anything they throw at you.