Selling your business is not something you do often, so one thing you don’t have going for you is experience. Many business owners believe the act of selling their business is similar to passing the baton in a 400 meter relay: once you’re finished running, you get to relax.
In most cases however, buyers will insist that you stay on for a transition period. This transition period can be anywhere from six months to five years, and you might be expected to continue to work in your business to help the buyer capitalize on the investment they’re making.
THE Question
At some point during the sales process the prospective buyer will ask you – oftentimes casually – “Why do you want to sell your business?” These eight seemingly innocent words have spoiled 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 – ready to move on to new and better things.
Obviously you don’t want to lie, but in this case 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” reveal to a potential buyer that you plan on winding down when they take over. However, in most cases what they want to hear is your intention to stay on and help them realize the potential locked inside your business.
Here are some suggested responses based on your age.
If you’re under 40, you clearly aren’t ready to “be put out to pasture” so you need to communicate that you see an huge benefit in merging your business with theirs.
“In order for us to get to the next level, we need to find a partner with more
If you’re between 40-55 years old, most people will understand the need to shore up your personal balance sheet:
“I’ve reached a stage 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 investor who can help us get to the next level.”
If you’re over 55, you can start to talk about retirement, but you want to make sure 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 yet, 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. Whether you end up staying on after the sale of your company or not is of course depended on many factors. But you don’t want your buyer to walk away from the deal just because you gave a casual answer to what seemed to be a casual question.