Planning to Sell? How to answer THE most important question
Many business owners believe selling their business is like passing the baton in a 400-meter relay: once you’re finished running, you get to relax. Buyers will insist you stay on for a transition period – anywhere from six months to five years. During that time, you continue to work in your business to help the buyer capitalize on the investment they’re making.
THE Question
At some point in selling your business, a prospective buyer will ask you – often 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, they want to hear 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 aren’t ready to “retire,” so you need to communicate that you see an upside in merging your business with theirs:
“To get to the next level, we need to find a partner with more <insert salespeople, distribution, geographic reach, capital, or whatever the partner brings to the table>.”
If you’re between 40-55 years old, most people will understand the need to shore up your 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 to help us get to the next level.”
If you’re over 55, you can start talking about retirement, but you want to ensure you communicate that you still have lots of energy and passion for your business.
“I’m at a stage where I need to start thinking about retirement. It’s a long way off, but I want to be proactive.”
Rehearse your answer to THE question so it becomes a natural response when you are inevitably asked THE question by a potential acquirer.
Mark Hartmann is a three-time Inc 500|5000 CEO with a rich sales, operations, and leadership background in the insurance, financial services, and healthcare sectors. With extensive experience growing and selling his own businesses, Mark leverages his expertise to help owners grow and sell businesses valued at $1M —$25M. He’s earned a master’s degree in organizational change management from St. Elizabeth University and a graduate certificate in executive coaching from Columbia University. Mark’s professional certifications include Certified Mergers and Acquisitions Professional (CM&AP), Certified Business Intermediary (CBI), Certified Exit Planning Advisor (CEPA), and Certified Value Builder (CVB).