There is a better question to ask the business owner than, “Why do you want to sell your company?”
When business buyers have initial conversations with business owners who wish to sell their companies, one of the first questions is “Why do you want to sell your company”. Over the years I have asked this question 100’s of times. It just seems like a natural conversation starter, which it is.
However I came to the conclusion a few years ago that other than to see if this person is long winded or someone who gets to the point quickly … the question and answer is rarely helpful. It many times directs the owner to say something awkwardly positive about the company they really want to sell. I almost always hear something irrelevant which never addressed the past, current or future state of the company … so why keep asking this question when there are plenty of other questions to ask someone as a conversation starter.
What about … “What are you going to do with your life after you sell your company?”
It may sound similar to the first question but the difference is … this question is not about the company at all rather it’s about the owner’s life. I feel better for my buyside clients if the owner immediately responds with some definitive life plan that can only happen after the company is sold. If the owner responds with a version of “I am not sure, no plans really”, then I might be a little suspect that a deal will ever happen.
I have found that owners who have something big and exciting planned following the sale of their company typically have their companies priced reasonably and are more motivated to muscle their way through the entire divestiture process, than owners who have no plans at all. So if a buyer is looking at two very similar target companies to acquire, “all else being equal” I recommend initially pursuing the company where the owner has a grand plan for their life post closing.
Finally, if you really want to ask the seller “Why do you want to sell your company?”, go ahead and ask … there is nothing offensive about the question … however more times than not if the real answer has anything to do with the business, “the reason” is somewhere in due diligence … and it’s up to you to find it.
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