Top 10 Questions To Ask Buyers When Selling a Business

I have drafted up a comprehensive list of the Top 10 questions any seller should consider asking any prospective buyer of a business they are selling.Yes you have read that right! Why would a seller need to ask questions? For many reasons. First and foremost, selling a business is a very long and bumpy process. You will get a flurry of interest in your business when it goes out to the marketplace for sale and not all enquiries will be worthy of your precious time.

There are sadly a lot of time wasters and window shoppers out there. It's hard work enough trying to run a business. Add to that the time and energy required to sell the business, plus handle negotiations and you have your hands full. By asking the right questions early on, you will save yourself a lot of wasted time in phone calls, meetings and emails and get straight down to business with those who are serious about making a purchase. Here are my 10 key questions any seller should consider asking when talking to a buyer:

1) Why do they want to buy your business?

It's the most straightforward question you can ask and will most likely follow the question that they put to you of why you have decided to sell the business. In an exact role reversal, this question will give you a good idea of what they are thinking in terms of the interest. If they give you a clear and decisive answer, chances are they are serious about getting into your field of business. Any delays, pauses or resistance to this question may give rise for concerns. It may translate that they have simply stumbled across your advertisement and wanted to see what you had to sell which in most cases, is going to be a waste of your time. Window shoppers are unfortunately part and parcel of the selling process and weeding them out can be time consuming and frustrating.

2) What are their present circumstances?

You'll be amazed at the variety of professions and circumstances prospective buyers are in when considering the purchase of a business. Many buyers are in a career or a company that they simply have grown tired of or simply want to move away from, that have little if no relation to what your business does. This is the exact point where you should analyse whether this person is looking for a means of escaping their present situation or is really serious about getting into your line of work.

Of course, it's very easy to judge people unfairly in these circumstances so keep an open mind, however if the person clearly seems to be from a field that bears no relation to yours and your company requires a defined skill, experience or qualification, you could be faced with an inappropriate sales lead.

3) Which other businesses for sale have they approached?

Following on from the previous question, this will no doubt clarify exactly where your prospective buyer presently stands from their own perspective. If they have approached a variety of businesses from all kinds of fields and niche markets, which they fully intend to run themselves, you may have a difficult situation to contend with. If however, they are solely concentrating on businesses specifically within your market, it would be worth asking why they have a particular interest in this field and you may gain a clear idea of why they want to get into your specialist area.

Reserve judgement before you write any prospective buyer off. The more questions you ask, the better understanding you'll have.

4) How much notice does the buyer have to give present employers?

Many people who are already in employment fail to recognise their own commitments and a lengthy notice period of 2 or more months could cause issues with any purchase and handover process.

5) Do they have any experience in your field of business?

If they lack experience in your field of business, ask if they intend to bring in employees or contractors who will help to take over roles and responsibilities that they are neither qualified or experienced enough to deal with. Many prospective buyers foolishly think they can 'learn the ropes' as they go which is a dangerous and foolish approach to any business.

6) How do they intend to fund the purchase?

This question tends to be the stumbling block that catches out many prospective buyers right from the start. Getting a sizeable loan from a bank, especially since the global recession is no mean feat. Most banks will ponder and scrutinise over the smallest of details and yet, many buyers simply forget to look into funding before speaking to business owners, assuming that getting a loan will be nothing more than filling out a few forms. If you ask the question and it is met with a delay or their eyes start to wander around the room, you can bet your bottom dollar that they a) haven't even given this any consideration until now or b) simply don't have the money in the first place.

If you are an experienced business person, you'll know right away at this point whether these buyers are wasting your time or have genuine, professional intensions.

7) Is the finance for the purchase already in place?

Continuing from the previous question, it is well within your rights to ask if they have the money in place whether through their own capital injection or from a third party such as a bank or business investor. Either way, you need to know that their money is good and they have the necessary capital to not only buy your business but run it effectively too.

8) Has the buyer drafted up financial forecasts?

Whether or not the buyers have seen your financial statements, any buyer should still be able to draft up rough forecasts to determine the levels of income necessary to pay for wages, running costs and day-to-day expenditure. You shouldn't necessarily have to expect every buyer to have performed any serious forecasting however, a buyer that displays this kind of dedication is clearly illustrating a level of seriousness regarding buying a business and you can only gain comfort from this.

9) Has the buyer considered the demands of running the business?

No matter how many questions you answer, any buyer won't know the true levels of work required to do your job. Naturally you don't want to put the buyers off but in the same token, they need to be given a realistic picture of what the job entails.

10) Do they have professional representation in place and have they been informed?

Anyone who is really serious should be talking to a lawyer and at least an accountant. If not, you would have to question why? They intend to spend a sizeable amount of capital on your business and start a new venture yet they have no representation or professional accountant advising them. To me that would seem rather odd.

Naturally, you should always ask any of the questions above gently, politely and with tact. We don't want to offend! A few of the points listed here are quite intrusive to some folk however, in business these are questions that one should expect to ask or be asked. If you can ask the above points in a carefully considered way, it should help you gauge a clear picture of exactly who your buyers are.

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Simon Burge, Article Team, Simply.Biz 
Website: www.simplybusinessesforsale.com 
Follow us at: twitter.com/simply_biz

Disclaimer

All information and articles published on this page and subsequent pages on this website by the author should not be treated as professional advise or as a comprehensive directive on how to sell or buy a business. These articles are only published as guidance and should not form any basis on which to sell or buy a business and should not be treated as professional or legal advice under any circumstances.