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    0 Replies Latest reply on Sep 24, 2019 1:33 PM by pittsenbargar

    Tough Questions a Buyer Asks When You Sell Your Business?

    pittsenbargar Adventurer

      So, you finally decided to sell your business; but now you are stuck on how to move forward. To move on, you decided to read different articles on the internet like determining the value of your business or how to prepare your business for selling. Still, you don’t have a clue on how to properly sell your business.

       

       

       

      So, you finally decided to sell your business; but now you are stuck on how to move forward. To move on, you decided to read different articles on the internet like determining the value of your business or how to prepare your business for selling. Still, you don’t have a clue on how to properly sell your business.

       

      Well, you’ve come to the right place! And we’re going to guide on what questions a buyer will ask in order to ramp up your preparations for selling your business. 

       

      In selling your business, you need to plan carefully and way ahead. You have to put yourself in your buyer's shoes and ask what will they be looking for when buying a business. This will be your starting point. If you are a buyer, you have to make sure that what you are buying will be an asset with longevity. The most obvious direction is that buyers prefer businesses that has a good track record, reasonable liabilities, and of course, has a good market.

       

      Remember that when you sell your business, it will be scrutinized and investigated. This is the reason why have to be prepared – documents should be available, organized, and ready for a data room.

       

      So, what really are the questions that buyers will ask you when you sell your business?

       

      Why are you selling your business? This may come off as a personal question, but really, it’s a technical question for the buyer. In asking this question, the buyer will have a general perspective about the current condition of your business. Are you selling it just because you see a downturn in the market? Are you selling it because the business grew more than you expected and it requires a different kind of leadership and skillset? Maybe you are trying to sell because of personal reasons, health issues or partnership disputes? Or are you selling it because you can’t manage its operations and the business is already in bad shape?

       

      What is the general performance of your business? After grasping the general situation of your business, the buyer will not hesitate to go down to the specifics. He/she will ask about the earnings, the lifecycle, your liabilities, personal guarantees, the market, clients, cashflow, and other business performance indicators that they think are important. They might also ask about your staff/employees and their performance – are they contributing to the overall goal of the business? Or are they a more relaxed team? By asking these questions, the buyer will be assured that they will not be inheriting bad debts, bad staff, erratic clients, and a liability in your business.

       

      How would you structure the sell of your business? Sometimes, the buyer will ask you if you know how you will sell your business. First time business sellers will sometimes find themselves confused with this type of question. It is because they thought that when they sell their business, they will just be paid in cash up front. But that is a misinterpretation; selling a business comes in many structures; and there are many factors to consider when you are selling your business.

       

      You have to think about your business structure, the type of business sale, your tax situation, financing, and of course, your post-sale plans. All of these factors should be structured in your exit plan; and an exit plan is sometimes the make or break of any negotiation. It is necessary that you, as the seller, and the buyer must reconcile what you both need and want in the negotiation process – and learning about the structure of the deal will be an important part of the transition.

       

      What is the reputation of your business? In a world where customers and clients can post whatever they want on social media, it is a bad sign when your business has been a subject of ridicule and negative reviews. The slump that a poor customer service brings to a business is a difficult place to get out of. Reputations are reflections of how you manage the overall operations of your business; and bad reputations of course, can mean, ineffective and inefficient management on your part. Prepare ahead of the sale with a plan to transition your clients to the new owner.

       

      Who is your customer base/clients? Learning the customer base is the move of a strategic buyer. In this, he/she will learn about the potential of the business – does the business already have a loyal set of customers? Does the business appeal to people? Buyers will be attracted to businesses that have already a pool of clients/customers.  Be prepared to know your customer cost of acquisition.

       

      How do you fare with other competitors in the market? This is the time to bring up the character and uniqueness of your business. Buyers will want to purchase a business that has the potential to be sustained over time.

       

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