Contact Us

Selling A Company – Answering the “Why Are You Looking To Sell?” Question

Enough Said?

Enough Said?

This article offers some suggestions on how to address a question you will be asked at every first meeting with a potential buyer when trying to sell a company – “Why are you looking to sell?”.

 
At some point in every first meeting with a potential buyer you will be asked: “Why do you want to sell your business?” If you don’t answer this question effectively the buyer is likely to move on to the next opportunity.
 

Why Is The “Why Are You Looking To Sell?” Question So Important To Buyers?

This question is more than an ice breaker. Your answer gives the buyer a sense of how strong your motivation is to see a transaction through. Buyers want to know if they are wasting their time in pursuing an acquisition of your company. It takes a great deal of time and effort to complete an acquisition, and involves considerable cost in legal, accounting and other fees. If you pull out of the sale at a late stage any fees incurred to that point will be “dead money” for the buyer.

On occasions sellers try to act as if they don’t need to sell their business. They mistakenly believe that this will encourage buyers to offer a higher price. Nothing could be further from the truth. All this approach will achieve is to scare a buyer off. Experienced buyers know that if a seller is not highly motivated the chances of completing a deal are slim.
 
What Is The Best Way To Answer The “Why Are You Selling” Question?

Start on the front foot. Make it clear that you believe now is the right time to sell at a fair price. This gives you an opportunity to talk about all the value you have created in the company – but also make it clear that you have a reasonable expectation for the purchase price.

Getting on the front foot only gets you so far. For a privately held company some more personal motivation will also be expected. It is always best to tell the truth. If a buyer gets a sense that you are being less than honest about the reasons for a sale they will almost always walk away. So if you are tired – say you are tired. If you want to move beyond the point where all the family’s wealth is tied up in the company – say that. If you are losing motivation after many years in the trade – admit it – but make it clear that you are looking to pass the business on to a more enthusiastic owner before any damage is done.

Your Age Plays Into The Kind Of Answer That Will Be Credible
 
The answers that a seller can get away with are to some extent based on age:

If you are under 40 – it is hard to make the argument that you are looking to retire. A better approach is to admit that you have taken the business as far as you can, but now it needs to be taken over by a company with more resources to take it forward. If you have been running the business for ten years or more it is fine to say that you just want to move on and try something else.

If you are between 40 and 55 – a buyer will understand the need to turn the value you have built into cash so that all your family’s eggs are not in one basket. At the same time be sure to stress the need for a buyer that can further develop the business.

If you are over 55 – it is fine at this age to talk about retirement, but make it clear that you are looking to sell while you still have energy and enthusiasm for the business.

 

If you want to find out more about these and other issues relating to the sale of a private company one of our business sale experts would be delighted to talk to you in complete confidentiality. Click CONTACT ME to book an initial phone conversation or call us on 01604 432964.

We welcome comments on posts, and questions from our readers. Use the “Leave a Reply” box below. We answer all reader questions within 24hrs. If you would like to be informed about new posts on the theme of selling a private company click the “Subscribe” button at the right hand side of this page.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

* Copy This Password *

* Type Or Paste Password Here *

20,410 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

UA-35460329-1