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How To Answer the Most Important Question A Buyer Will Ask

Planning to Sell? How to answer THE most important question.

Are you planning to sell? Here's how to answer THE most important question.

The act of selling a business is often compared to passing the baton during a 400 meter relay: once you finish, you can relax.  In reality, buyers will insist that you stay on for a transition period - anywhere from six months to five years - in which you work on growing your business and helping the buyer capitalize on their investment.

THE Question

In the process of selling your business, a prospective buyer will ask you - usually casually - "Why do you want to sell?" 

Innumerable deals have been derailed by these eight seemingly innocuous words.

The question is asked to evaluate your likelihood and willingness to stay on or if you already have one foot out the door. 

Although you don't want to intentionally lie, there is an appropriate way to answer THE question. "I want to spend more time with my kids" or "we've got a baby coming" suggest to a potential buyer that you intend to wind down once they buy the business. What they want to hear is that you intend to assist them in realizing the potential locked in your business. 

Here are some suggested responses based on your age. 

If you’re under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in merging your business with theirs: 

"We need a partner with more *insert sales people, distribution, geographic reach, capital or whatever the partner brings."

If you’re between 40-55 years old, most people will understand the need to shore up your personal balance sheet: 

“I’ve reached a time in my life where I want to create some liquidity from the value I’ve created so far, and at the same time I want to find a partner who can help us get to the next level.”

If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business. 

"I'm at a stage where I should start thinking about my retirement. I want to be proactive, even if it's a long way off."

Rehearse your answer to THE question so that it becomes second nature when THE question is asked by a potential acquirer.

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The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity

This is an article originally published by The Value Builder System, and presented to you by our firm. We appreciate your interest.