What are the 8 key questions a buyer will ask you before buying your business?

When you are selling your business one thing you can be sure of is that you will be asked lots of questions. This can often be quite frustrating and you will often feel the buyer is testing you. Simply he is. Before he writes the cheque he will wish to grill you on all facets of your operations. He needs to understand, in a short space of time, what you have learnt over many years. This can make the process seem intimidating. Of course every buyer will be different, but having answers to the basic questions will help when you’re in the hot seat:

1. Why do you want to sell your business?

A buyer wants to buy a business that has a great future, and you and your brokers presentation will be around this, so it can be tricky. So prepare your answer to “Why do you want to sell, and sell now, when the future looks so great? “

2. What does is cost your business to get a new customer?

Your buyer wants a business he can grow and therefore needs to understand how much it costs to grow. Evidence is needed that you have a predictable, economical and scalable formula for finding new customers.

3. What is your market share?

Again its about growth and trying to understand how big the potential market is and what part of it remains for them. So understand the size of your market?

4. Who are the key members of your team?

The acquirer, more often than not, sees your business as an investment and not a job. He therefore wants to know who makes your business tick and, by inference, that this is not you!

5. What do you customers look like?

Strategic buyers are searching for any possible synergies between their sales and yours. The more you know about your customers and their demographics, the better the buyer will be able to assess the strategic fit. The better the fit the more they could pay. If your customers are other businesses, a buyer will want to know who the decision maker is, e.g. training manager, sales director, finance director.

6. How do you make what you sell?

This question is asked to understand how unique your formula for creating your product or service actually is. Potential buyers want to know if you have any proprietary systems that would be hard for a competitor to replicate. They will also want to know if the creation of your product or service is dependent on any one person.

7. Is there anything unique about your product or service?

A buyer is trying to understand what kind of edge your product or service has in the market that will protect them from competition in the future. Also they wish to know if you have any legal measures in place to back this up.

8. Can you describe your back-office setup?

Most buyers will try to understand if they can achieve economies of scale. So they will want to know about your bookkeeping and billing software, how customers pay and how you pay suppliers.

Summary

Our list is, of course, for from a complete list of potential questions. It is however a good start when you’re preparing to represent your company to potential buyers. Having these answers at your fingertips will increase buyers confidence and support the value of your business.

Paul Dodgshon is a Regional Partner in Business Partnership, who have been helping business owners sell their businesses since 1979. You can learn more about Paul here.

Menu