When in the process of trying to sell your business, a prospective buyer will ask you – often times casually – “Why do you want to sell your business?” These eight seemingly innocuous words have derailed more deals than any others.
Buyers ask THE question to evaluate how likely and willing you are to stay on or if you already have one foot out the door.
Obviously you don’t want to lie, but there is a right and wrong way to answer THE Question. Answers like “I want to slow down a bit” or “I want to travel” or “we’ve got a baby on the way and I want to spend more time at home” communicate to a potential buyer that you plan on winding down when they take over. However,what they want to hear is your intention to help them realize the potential locked inside 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 to sell you business and merge with theirs: “In order for us to get to the next level, we need to find a partner with more <insert sales people,distribution, geographic reach, capital or whatever the partner brings to the table>.”
- If you’re between40-55 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 fromthe value I’ve created so far, and at the same time I want to find a partnerwho can help us get to the next level.”
- If you’re over 55, you can start to talk aboutretirement, but you want to make sure you communicate that you still have lotsof energy and passion for your business: “I’m at a stage where I need to start thinking about retirement. It’s along way off yet, but I want to be proactive.”
Rehearse your answer to THE Question so it becomes a natural response when you are inevitably askedTHE Question by a potential acquirer.