HVAC Business Broker > The 8 Questions Buyers Will Ask

The 8 Questions Buyers Will Ask

No two business sales are alike, but they do have many things in common. That’s good news for sellers, because it helps them prepare before meeting their buyer. The clearer they are on what areas will be covered, the better they can be addressed.

Here is a list of questions most buyers will ask early in the discovery process:

What does a day in your life as an owner look like? What they’re really asking: how involved are you in doing the technical work? Smart buyers want to hear that you spend most of your time working on CEO-level tasks including hiring, training, managing people, and improving systems. If you’re still turning wrenches, they’ll want to know, because it factors into how many people it will take to replace you in the company. If they know they’ll have to hire supervisors and technicians, they’ll deduct from their offer to compensate for it.
Why are you selling? What they’re really asking: why are you selling now? There’s no wrong answer here; the truth is the best answer. Whether it’s about retirement, burnout, personal or family issues, or losing your passion for running the company, the buyer will understand. Just make sure your story is true and consistent throughout the diligence process. If “burnout” is code for “my team is a mess,” or “a new competitor moved in, and they’re going to take a lot of our business,” the buyer will eventually catch on and may start to question your trustworthiness.
Who is your second in command? What they’re really asking: who is your most valuable employee? Ideally, you’ll have someone in your business whom you trust and who keeps things running smoothly in your absence. A buyer will want to know about their skills, experience, and goals so they can work on making sure they stay with the business after the sale. This can get complicated if family members play key roles in the business, since they’re most likely required to leave with you (or be subject to non-compete agreements).
What risks do you see the business facing? What they’re really asking: what are my biggest challenges going to be over the next couple of years? Every business includes risk, and if you don’t admit to the issues you face, you risk the buyer hearing it from someone else. It might be finding and retaining qualified labor. It might be the imminent retirement of a key employee. It might be growing competition or your customer concentration (especially if you’re heavily invested in new construction). Once the buyer understands the issues, they can decide how much that risk will impact their offer.
Who are your biggest competitors? What they’re really asking: is the company trending up or down in the competitive market? I’ve heard business owners tell people they don’t have any competitors – “no one does what we do as well as we do.” That sounds like pride of ownership, but a buyer will see a big blind spot. If you’re not monitoring the competition, you risk falling behind in sales, repeat business, and the race for talent.
What would you do to grow the business, if you could just wave a magic wand? What they’re really asking: what gaps would you like to fill if you had the energy, the capital, or the talent? Would you hire more staff or raise your pay levels? Offer benefits to be more competitive? Would you invest in more marketing? Expand into refrigeration or plumbing? Every wish list item comes with its “but” factor, like having the time, the money, or the right people with the right skills to achieve your goals. Let the buyer know so they can see the full range of opportunity in the company.
How do you get your customers? What they’re really asking: where the next dollar is coming from? This is something that’s important to think through and be prepared for. I recommend you report actual data, rather than reply from your impressions. Understanding how much of your business comes from customer referrals, online searches, social media, or direct mail requires a system and some diligence. Building “how did you find us?” into your customer conversations and recording the data helps you spend your time and money where it counts. If you’re wasting resources on leads that don’t convert to sales, a buyer might see opportunity for some quick wins.
Do you have customer concentration of more than 10 percent in any category? What they’re really asking: how much of the business is at risk of leaving when you walk out the door? Even long-term and loyal customers or contractors might decide to use a change of ownership as an excuse to move to a competitor. If the owner has been a big part of ensuring quality service or building relationships, it presents much more risk for a new owner. An experienced broker will have you ready for this question and will have prepped you with an appropriate – and truthful – answer. If you’re wondering why this matters, I’ve written before about how customer concentration is a red flag for buyers.