8 Questions You’ll Get When Selling Your Business
One of the most intimidating parts of selling my last business was facing the barrage of questions during the various management presentations I did for companies interested in buying it. Every meeting had a different vibe, with each potential acquirer keen to dig into various aspects of the business.
Based on my experience in the hot seat, I've prepared a summary of some of the questions you're likely to get when selling your business.
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 would you want to sell it?'
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 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 depth of your team and determine specifically which members need to be motivated and retained post-purchase.
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., training manager, 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. 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.
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.
This is not an exhaustive list and will certainly benefit from your contributions. Please use the comments section below to share other questions you have been asked by potential investors/acquirers.
JOHN WARRILLOW | Columnist | Sellability
John Warrillow’s new book, The Automatic Customer: Creating a Subscription Business In Any Industry will be released on February 5, 2015. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You and the founder of The Sellability Score, a company dedicated to helping business owners improve the value of their company.