Business Article - Questions to Ask a Prospective Purchaser
Are you aware of the biggest blunder that is made by many entrepreneurs who are selling their businesses? According to surveys and studies that have been conducted through the years, most entrepreneurs are far too passive when it comes to selling their businesses. You may not realize why it is important to be aggressive when it comes to selling a business, which is what this article is all about. If you do not aggressively investigate any and all potential buyers while they are simultaneously investigating you, then there is no possible way that you will get the best available deal when selling your business. Selling a business is not a passive process, and you should not simply sit back and wait for the best offer to arrive. Instead, you should grill potential buyers to ensure that you get the best possible deal when you sell your company.
Here are some important considerations to make when it comes to appraising potential buyers. Choosing the right buyer is just as important for you as choosing the right business is important for that buyer.
1 Make on-site visits.
Potential buyers are going to want to visit your operations, to see how you do things, how smoothly the business is run, and what the business is like in general. What many sellers do not realize when selling their business is that they should visit the operations of their potential buyers as well, as they can gain a lot of information by looking to see how potential buyers handle their current business ventures. You can find out about the strengths of the managements, how the company plans on incorporating an acquisition into the current operations, how previous acquisitions have been handled in the past, and many other intangible factors worth noting such as how employees are treated, and whether or not the company can be trusted when it comes to your current employees. You may even want to stretch this further by visiting the sites of previously acquired businesses to interview the management teams, as well as by interviewing all of the management teams in current business ventures. The more you know about each potential buyer, the more comfortable you will feel when it comes time to pass your business off to a new owner. And the more you know about each potential buyer's capabilities, the better you can come to the right decisions during the acquisition process.
2 Analyze the future value of every proposed acquisition.
No matter how many or how few offers you get from various businesses, you will likely be offered a wide variety of different combinations involving cash, debt, unregistered stock and registered stock. It is important for you to take the time to assess both the financial realities and the financial future for each of these offers, which involves capital base, bank accounts, cash flow, liquidity, stock value, and a potential to go public. With this analyzation, you can get a better sense of how much the deal is actually going to be worth to you, both in the presence and in the future. There will be companies that offer stock primarily, but there is a large difference between privately traded and publicly traded stocks, and if you cannot receive a guarantee that the stock will trade publicly and be successful over time, it simply may not be worth it to pursue this as a viable option. Instead, you should opt for offers that are guaranteed to go public soon, or that are already making a profit as a publicly traded stock.
3 Make the Sale a Full-Time Job
Are you trying to sell your company? You have to be able to rely upon your management team to make the day-to-day decisions for the business, because it is imperative that you turn selling your business into a full-time profession until you are pleased with your choice of a buyer. If you find yourself spending several months preparing your business for a sale, choosing the right buyer, analyzing all of your options and then helping the new buyer integrate your business into theirs, then it will definitely be beneficial for you to be working on selling the business full time, without having to complicate things by managing the company at the same time. You may find that turning the sale of your business into a full time job is a great way of focusing yourself on the process. If you turn selling your business into a full time job, and dedicate all of your time to selling your business, you will probably have a much more advantageous experience, finding better offers in a smaller amount of time than if you were only selling your business in your spare time.
4 Bring in outside help as soon as you possibly can.
It is important to bring in outside lawyers and certified public accountants or CPAs early on in the process of selling your business. Most business acquisition deals are much too complex not to involve extra outside help in the process. It is generally quite cost effective for you as the seller to bring in specific expertise when it comes to mergers and acquisitions. This is because you only have one chance to make this deal happen, and have to be prepared enough to do it correctly if you want to get the best price for your business, as well as to ensure that your business is falling into the right hands.
5 Ask questions!
There are many questions that should be asked of any potential buyer when it comes to selling your business. Here are a few of the best questions to ask potential buyers in order to determine whether or not they are serious. You should also add your own questions to this list, because peace of mind is important when it comes to selling your business.
- What is your background and experience like?
It takes a great deal of time for people to completely understand the nuances of a business. Find out what type of business experience each potential buyer has, and where their background lies when it comes to business management.
- What is the future of my business?
Is the buyer you are considering already the owner of a business? Does he or she plan on acquiring your business to work alongside his or her business, or is that buyer looking to simply take over your business? This actually speaks to the buyer's seriousness, because they have to be able to tell you what their plans are for your business. The more detailed the plan, the more likely that particular buyer has put quite a bit of thought into the process.
- Do you need help or training after purchasing the business?
This is another question which speaks volumes to how prepared a particular potential buyer is to own your specific business. Someone who does not already own a similar business may require training or assistance for several weeks, months or even a year before they have all of the experience and expertise to run your business in a similar fashion to how you did. If the buyer in question is planning on acquiring your business to be an addition to their own business, then there is a good chance that they will require a lot less training and preparation before they can adequately take over your business and all that is has to offer. Choosing a buyer will depend heavily upon how much training is necessary for your buyer to run the business, at least as long as you care to have the business run in the same way that it was when you were in charge.
- Will you keep or lay off current employees and management?
This also has to do with personal preference. If you want your previous employees and management team to keep their jobs, then you should look for a buyer who wants to keep them employed, or who will keep them on within the company when their company acquires your business.