1) Why are you selling?
This question might seem obvious, but be prepared to answer it nonetheless. If you are retiring or relocating, those are easy and clean-cut answers. However, if the answer is something more complicated, like you and your business partner are no longer getting along, or you are burnt out and have other business interests, you need to make sure that you convey this to the buyer in the most positive way possible. Of course, you will need to be honest when speaking to a prospective buyer, but saying that you are tired of working 70-hour weeks or you have come to loathe the business isn’t going to inspire a potential buyer submit a full-price offer. You will undoubtedly get asked this question, so just make sure that you know what you are going to say when the time comes.
2) What am I buying?
Buyers want to know exactly what they are paying for when they purchase a business, so make it obvious. Does the purchase include equipment, client lists, goodwill, reputation, real estate, inventory, trained employees, documented business processes and procedures? Make sure the benefits of buying this business are highlighted and marketed by your business broker. Make sure that your broker understands all that your business has to offer, so they can sell it for you.
3) How did you come to that asking price?
The most important thing that you can do when you list your business is to get the asking price right (in relation to comparable sales), so that you and your broker can prove to buyers where the value is in your asking price. About 75% of businesses currently on the market will unfortunately never sell, and the majority of them aren’t selling because they are grossly overpriced. Get the asking price right straight from the start, so you can give yourself the best chance of selling. Businesses that are priced correctly make it easy to convey the value to buyers, and those businesses will sell. You and your broker have to be able to justify your asking price to potential buyers, so make sure that you understand your valuation.
4) Can I see current financials?
Depending on the time of year, the financials on your listing might be a little old. For example, it’s February 2022 but your most recent numbers published are your tax return for 2020. Since tax returns for 2021 aren’t even due to the IRS until March, you don’t have 2021 financials available for buyers. For a buyer to seriously consider your business, they are going to want to see the most recent year’s performance, a year-to-date report or a 12-month rolling Profit & Loss Statement, depending on the situation. Make sure that your bookkeeping is up to date, so that you can give your broker your most current numbers. That way, when a buyer requests them, you will be ready to go and won’t have to scramble to get your books done first.
5) Where is the potential in the business?
There is a saying in business sales that goes, “Buyers pay for the past, but buy it for the future.” That means that they pay the purchase price based on the business’s past performance, but the reason they actually buy the business is for its future potential. Almost all buyers believe that they can improve the business they are considering purchasing. Sure, they have their own ideas of how to do that, but they will want to hear yours too. In almost every buyer/seller meeting I’ve been a part of, the buyer asks the seller what they would do to improve or grow the business. Make sure you are prepared for this question and that you have some helpful hints or insider information to offer them. Remember that you are trying to sell your business, so you want to help the buyer to visualize themselves maximizing the potential in your business, by showing them what could be.