Selling a company means being prepared to answer tough questions from potential buyers. It's important to be confident, be prepared, and have all of your company's relevant information available to disclose. Assume that the truth would be uncovered during due diligence, and offer it freely. This will build trust and contribute to a speedier transaction.
Why are you selling your business?
There are many legitimate reasons you might be selling your company, such as health issues, retirement, divorce, relocation, or even burnout. Be prepared to articulate the reasons for the sale, to reassure the buyer that no hidden agenda exists and your business is worthy of acquisition.
How will your customers react?
Customer relationships are often built on strong personal relationships. This is often the case with small to mid-size businesses, where it is possible to be on a first name basis with all of your customers. If you have a few large customers who represent a large percentage of the business, it is important to let the buyer know that you will do whatever you can to transition these relationships to the new ownership.
Who are your key employees?
Buyers know that it is important to retain employees who have played a significant role in building the company to its current level of success. Their departure could have a profound effect on the current business, and limit the potential for continued growth in the future. If only a few employees possess the technical knowledge or personal relationships that keep the business afloat, the buyer has every reason to be concerned about what might occur post-sale. Retention bonuses, non-compete agreements, and reassurances can go a long way to ensure employees stay with the business.
How has the business changed in recent years?
Are there identifiable trends in the sales, gross margin, or profitability of the business? These provide a forecast for the business and indicate value for transactional purposes. It is common for buyers to assume that trends, positive or negative, will continue. Be prepared to explain trends and whether or not you expect them to continue. As the expert on your business, your insight will help a buyer understand what they have to gain by becoming its new owner.
What is the projected revenue for the next year?
When it comes to revenue projections, the buyer is looking for sound projections based on reasonable assumptions. An unrealistic forecast will lead buyers to believe the worst, and they may suggest an "earnout" - that a percentage of the purchase price will be contingent on your projections being accurate.
What is the company's potential to grow?
It can be assumed that the buyer hopes to grow and expand your business after the sale. If a buyer does not believe they can do this, most will not be interested. Therefore, it works to your advantage to present viable expansion opportunities for the business. Again, be realistic. You should also be prepared for the buyer to ask why you have not expanded the business yourself, if so many opportunities exist. Contentment with the size of the business, or an unwillingness to take on additional risks to grow the business, are both valid reasons the buyer will understand.