12 Questions to Ask Buyers When Selling Your Business

12 Questions to Ask Buyers When Selling Your Business

It is essential to qualify potential buyers to ensure they will maintain confidentiality, have honest intentions for acquiring your company, and are in a position to fulfill the terms of any offers they make. Ideally, you want to find a buyer who is willing to continue your long-term vision (and whose growth strategy aligns with yours) and who is willing to keep your current employees on staff. 

Depending on your specific goals, it may also be important for you to find a buyer with experience that does not need much (if any) training and does not require any seller financing. Below are 12 questions that you (the seller) should ask potential buyers when they inquire about purchasing your business. 

Why are You Interested in Buying My Business?

First, it helps to determine the motive behind the potential buyer’s offer. Are they interested in merging your company with their own or do they plan to solely operate your company on a full-time basis? In some cases, buyers may simply want your customer base and local reputation. 

For example, if they own a company in a similar industry and are interested in expanding to a new location, they may try to purchase your company to give themselves a head start in the new region. Regardless, it is always helpful to know why a potential buyer is inquiring about your business, especially if you are screening their offer (or intent to offer) to ensure they are qualified. 

What Experience Do You Have Within The Industry?

The experience level of the buyer can affect you in multiple ways. For one, a less experienced buyer is more likely to face problems that are not equipped to solve after the sale. This could lead to your legacy being tarnished if they were to fail. In some cases, you may be the one to have to step in and resolve any issues, particularly if you have agreed to assist with training the new owner after the purchase. On the other hand, an experienced buyer will already understand how to operate the company without much assistance from the previous owner. 

Are You Buying The Company to operate yourself or will Someone Else operate day to day?

There are different types of buyers — strategic buyers, individual buyers, private equity groups, and more. Some buyers, such as an individual buyer, have the intent to operate the company themselves. However, with other buyer types such as a private equity group, they are purchasing the company on behalf of another person. This could be to add it to their comprehensive portfolio. You should understand the type of buyer when someone makes an offer as it could impact your overall experience and their willingness to negotiate and/or make offers of fair market value.  

Have You Purchased Any Businesses in The Past?

It is not necessarily a bad sign if the potential buyer has not made any purchases in the past. However, it could indicate the need to offer more guidance throughout the process. More specifically, your business broker should know if the potential buyer has experience with the purchase process as they will be the ones negotiating with and guiding them through the purchase journey. Also, this can tell you more about their intentions. If they have purchased numerous companies and they are simply trying to add to their portfolio, then this may be an indication as to how they will run the company once the purchase is finalized. 

How Do You Intend to Grow The Company?

You have likely poured a lot of time and effort into building your company. The last thing you want is for a new owner to come in and fail, which hurts your legacy and reputation as well as may negatively impact the future of your employees. Although a new owner is free to grow the company the way they desire and see best, it may provide more comfort to choose a buyer who sees the company’s future and has a similar growth strategy as you. 

Do You Intend to Keep My Employees on Staff After The Sale?AdobeStock 281772944

Depending on the number of employees you have and how long they have been with the company, this may or may not be an important factor. If you are in an industry where a high turnover rate is expected and employees do not typically stay with you for an extended period of time anyway, then it may not be a big deal if the buyer brings in their own workforce. However, if you have employees who you want to protect, then you will need to ensure the buyer is willing to keep your staff the way it is for an extended period of time after the sale. 

Are you Interested in Buying The Real Estate or Leasing The Property?

If your business owns real estate, then you will need to determine your plans for it with the sale. In many cases, sellers will include the real estate in the sale. Of course, this means the buyer will need to make a significantly higher offer. In other cases, the seller may decide to keep ownership of the real estate and lease it back to the buyer at a fair rate. Whatever the case may be, these details must be ironed out prior to closing a deal. 

What is The End Goal? Do You Intend to Sell Within The Next 5-10 years?

Some strategic buyers and financial buyers purchase the company with the intention of selling it in the near future. In other words, they are already planning the exit strategy upon purchase. This is particularly the case if they feel as if your company is likely to be far more valuable in a decade or less than it is right now. Depending on your goals and vision, you may want to avoid these types of buyers. However, in many cases, they can be great buyers to sell to so long as they have honest intentions and you feel as if they will do a good job growing the company the right way. 

Are You Willing to Sign a Non-Disclosure Agreement (NDA)?

A non-disclosure agreement, also called a confidentiality agreement or NDA, is a legal document that states that the potential buyer is not allowed to disclose any privileged information they may view in your sales memorandum, video interview, etc. This protects the confidentiality of the sale and ensures no confidentiality breaches occur as it could otherwise jeopardize business operations, profits, and the valuation of the company. You should ensure that any potential buyer who views your sales memorandum signs an NDA. 

How Involved Will You Be in Daily Operations?

Of course, a family investment group or private equity firm will not be active in daily operations of the company; a strategic or individual buyer may be highly active with the company. It helps to determine how active and involved the buyer will be. If they are not active, then you may want to determine who will run daily operations. Will they promote one of your employees or hire someone from outside the company? 

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How Do You Intend to Finance The Purchase?

Some buyers pay the full amount upon purchase without financing. Oher buyers may receive a loan from the Small Business Administration (SBA). In other cases, the buyer may request seller financing. You need to determine how open you are to the possibility of seller financing. Some sellers are okay with the option if it means a higher sale price and the ability to choose a buyer they prefer. For many other sellers, however, seller financing may not be a non-starter. 

What Level of Involvement Do You Need From Me After The Sale is Complete?

Last but not least, you will need to ask the buyer how involved they need you to be during the transition and training period. You will also need to determine how willing and able you are to participate with the transition. Some sellers are not able to be involved much at all with training a new owner. For example, someone who is selling due to health reasons may need a buyer who needs no training at all. In other cases, the seller may stay on staff at their current salary for up to a year (or as long as the buyer needs). 

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Need a Business Broker? Contact Sigma Mergers and Acquisitions Today

Our Dallas business brokerage helps business owners sell for fair market value. We make the sales process easy and stress-free for our clients. With offices in Houston and Fort Worth, Texas as well, our dallas business brokerage helps sellers all across the state of Texas. Contact us today for a free, no-obligation business valuation. Sigma Mergers & Acquisitions is the leading Mergers and Acquisitions, Business broker advisory firm in Dallas Texas specializing in facilitating strategic transactions for businesses across diverse industries. Our seasoned team of experts meticulously navigates clients through the intricate process of Business brokerage, mergers, acquisitions, and divestitures, ensuring seamless transitions and maximizing value. With a client-centric approach, we offer tailored solutions designed to meet the unique needs and objectives of each organization. Our comprehensive suite of services encompasses every aspect of the transaction lifecycle, from initial valuation and market analysis to due diligence, negotiation, and post-merger integration. Through a combination of extensive industry experience, market insights, and unparalleled dedication, Sigma Mergers & Acquisitions delivers exceptional results that drive growth and prosperity for our clients. Whether you are considering selling your business, seeking strategic acquisitions, or exploring other growth opportunities, trust Sigma Mergers & Acquisitions to be your trusted partner every step of the way. Contact us today to discover how we can help you unlock the full potential of your business and achieve your strategic objectives.

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Scot Cockroft Business Broker
Hi, I’m Scot Cockroft.

When I founded Sigma Mergers and Acquisitions back in 2003, I had sold my business the year prior.

Now, that can sound good, but let me tell you, back in 2003, it was not easy to sell a business. Not that I’m saying in modern day times it’s easy to sell a business, but back then I interviewed broker after broker after broker, and no one was interested in actually seeing the value that my business brought to the table.

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