When selling your small business, you'll be bombarded with questions - from the brilliant to the ridiculous.
You need to be prepared for them all. The more you're prepared the better experience you'll have with potential business buyers.
Tim Cunha (SF Bay Area Business Broker at 650-600-3751) reviews many of these possible questions. Here are some questions you can expect to be asked:
1. Why would you want to sell your business?
Although, as a business broker, I tell business owners that the "best time to sell is when you're doing well," buyers always want to know the "real reason. My response usually is simple: it's the right time for the seller because of retirement, a move to another locale, or another business opportunity they want to pursue. And then I ask the buyer a simple question: "Would you want to buy a business that isn't doing well?"
2. What does it cost you to acquire a new customer?
The buyer wants to know if you have an economical, practical, scalable, and sustainable system and process for getting new customers.
3. What is the extent of your market penetration?
The buyer, being interested in future growth, needs to understand how big the current market is and what percentage of it you already own. And, how can that market be expanded, vertically and horizontally?
4. Who are the buyers of what you're selling?
Strategic buyers - those already in your industry - are looking for potential synergies between what you sell and what they sell. Knowing the details of your customers' demographics, you will be better equipped to help a buyer assess a strategic fit.
5. How do you produce, acquire, or process what you're selling?
By asking this question, potential buyers can assess the uniqueness and distinctiveness of your method of creating whatever product or service you make or deliver. Prospective buyers need to learn if you have proprietary systems or procedures that make you stand apart and would be difficult for a competitor to replicate. The more unique you are, the more valuable you may be. For obvious reasons, they will want to know if any of this unique or proprietary value depends on any one (or more) specific persons.
6. What (if anything) makes your product or service unique or special?
Knowing if there are aspects of your business that will protect the buyer from current and potential future competitors is vital to their assessment of your value. What, if anything, have you done to distinguish yourself from and protect yourself from the competition?
7. What are your operations and management processes?
Depending on the type of buyer, they are going to want to know how easily they can take over day-to-day and strategic management, or integrate it into their existing operations. They will want to know how you manage your bookkeeping and finances, marketing and sales, purchasing procedures and vendor relations, procedures for managing materials and inventory, and methods for producing and delivering the product or service.
8. What employees are essential to your team? ... to future success?
Any potential acquirer needs to understand the dynamics of your team—how deep is "the bench?" They need to know who are the key players, what motivates them, and how they will be incentivized to stay with your business once you are no longer the owner.
This list is not exhaustive, but it is a good insight into the kinds of questions you, and your broker, need to be prepared to answer to properly represent your business to prospective purchasers.
About The Author: Tim Cunha is a Business Broker in the San Francisco Bay Area. Having managed and sold several businesses of his own, Tim offers business sellers extensive personal experience and professional expertise in building business value, planning a successful exit strategy, "packaging" and promoting the sale, and coordinating a successful and profitable transition. Tim can be reached direct at 650-600-3751.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Mike Brewer: Liquor License Brokers, ABC Consulting Services
Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100.
|Harry Sidhu, CBB, Broker - SF Bay Area, Central Valley, SAC Region
Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.
|Prabhjot Randhawa, Broker: SF Bay Area, Northern Central Valley
I'm a Business Advisor at Liberty Business Advisors of San Fransisco. I have over 20 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 10 businesses.
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