MVQs! Most Valuable Questions to ask Sellers?

searcher profile

February 01, 2021

by a searcher from Babson College - F.W. Olin Graduate School in Boston, MA, USA

On the back of having my first call with a business owner tomorrow who is looking to sell, I wanted to know from Searcher's experiences what some of the best questions/structures they have used for initial calls and what you feel are the best questions to ask to uncover more insights.

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commentor profile
Reply by a professional
from University of Maryland at College Park in Danville, CA, USA
Seconding what ^redacted‌ said. Your goal is to establish such a strong rapport and trusting relationship that you can ask any question you feel is appropriate and the seller will answer you honestly. These questions have a natural progression. You can't start with the toughest questions first - you have to start with the easy ones. Let them brag about themselves and model correct behavior by giving the most impressive bullet points about yourself as a way to establish unassailable credibility.

Here's a sample progression of questions in reverse order from last to first:

Would you accept an offer at a valuation of XX?
Would you sell me your company? (or "What would you need to see from me to feel confident that I'd be an ideal buyer?")
Do you envision continuing to work in an executive role?
What are your plans after the sale?
Is it important for you to have equity in the business post-close?
What are the biggest threats to continued success?
Are there any weaknesses in the company that you think a buyer could correct?
In your mind what are the biggest growth opportunities for the business?
How much time to you hope to devote to the business after the sale?
What would an ideal buyer look like for you?
What is making you think about selling right now?

A couple of additional points:
- Rephrase "why" questions with the word "what" to help counter the instinct toward defensiveness. For example, the question "why is there so much customer concentration" could be rephrased as "what factors contributed to your customer concentration?"
- Use "Would it be helpful if..." questions; e.g. "Would it be helpful if I shared some ideas about how I would look to create value?" etc.

Good luck!
commentor profile
Reply by an investor
from University of California, Berkeley in Moorestown, NJ 08057, USA
I commented on another recent post with this thought - small business owners are very personally attached to their businesses. The business you are thinking of buying from them is often their biggest achievement in life (if they started it) or a family legacy (if they inherited it). They are looking at you as if you were going to marry one of their children. Agreeing wholeheartedly with the last two posters, can't stress enough how much the initial conversation is a two-sided interview.

I'd add that you want to demonstrate an understanding of the business and the industry. If this is a brokered deal, you've got a CIM by now which, if written well, will give you some depth in the particulars of the business. Use the IBIS resources to understand the industry and also try to learn something about the sub-market your seller plays in. For example if there are local competitors demonstrate that you know who they are. Likely they are personal friends of your owner, even though they steal each other's lunch money all day long LOL.

Lastly, ask them about their key employees. Demonstrate to them that you are interested in taking care of their people and building a good relationship with them. Coming back to the marriage with offspring concept, they likely consider at least their key people to be a part of their "family".
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