One of the first questions that buyers will ask the owner is: “Why are you selling your company?” Rest assured, one way or another, directly or indirectly, buyers will ask this question. The answer to the question is personal to the owner and it must be articulated in a way that is convincing and consistent. The owner should prepare a strong answer to the question before beginning a sale process.

Responses tend to fall into three buckets: 1) personal, 2) financial, or 3) business.

I want to slow down or my spouse wants me to retire.
I have other interests that I would like to pursue (e.g., travel, golf, philanthropy). Now is the time to pursue them while I am healthy.
A family member (or myself) is sick and needs my attention.
The value of the company represents too much of my net worth; I need to diversify my net worth.
The value of the company has increased considerably and I want to monetize the gain (after all, no one is ever criticized for taking a profit!).
I need to make investments in the company that will take five years to mature. I am not prepared to own the company for another five years.
The Company needs to grow and have access to more resources in order to compete in the current environment. Given my age, I am not prepared to provide those resources.
I do not have family/management team succession in-place to manage the company to enable me to retire and continue to own the company.

The “why” question should be relatively easy to answer, but the way that it is answered will be indicative of whether or not the owner is prepared to follow-through on the sale. It’s the follow-up question(s) that can determine if the owner has thoroughly considered the implications of a sale. These include:
What will you do with your time after you sell the company? What are your interests?
Do you want to work post sale and for how long? Have you ever worked for anyone else?
Have you offered your management team the opportunity to purchase the company?
You are young. Are you sure you want to sell the company?
Have you undertaken any tax or financial planning?
Have you assembled a team to help you with the sale?
If the owner would like to work post sale, the owner’s agent will be asked: “How do you think a liquidity event will change the owner?” In other words, will the owner’s motivation change? Will the owner’s work habits, hours, and commitment to the company change? The answer to this question is: ”No one knows until the sale closes.”
All of these questions are designed to determine if the owner has thought through the sale process, has considered life after selling the company, and will follow through with the sale.
Consider this scenario: The owner and a buyer determine that they would like to pursue a transaction. From the owner’s perspective, selling their company has now become a demanding second job. The buyer will request volumes of information about the company, will spend a lot of time with the owner, and will study every facet of the company. Is the owner prepared to provide this information and to invest this amount of time with the buyer? Does the owner recognize that they cannot lose focus on operating the company during the sale process, hence the second job?

Selling a company is a momentum game. The owner must be prepared to provide a regular flow of information in a timely manner to the buyer, otherwise the buyer will lose interest, conclude that the owner is not a serious seller, and will move on to other opportunities.

From the buyer’s perspective, they can only pursue acquisitions of companies that are owned by motivated sellers since they are investing a significant amount of time, spending money on diligence, and otherwise pursuing this acquisition to the exclusion of other opportunities.
In conclusion, buyers want to know that the owner has a well considered reason for selling their company, is serious and motivated, and understands the effort that it will take to sell the company. Otherwise, the buyer and seller will both end up with a costly busted deal and a huge opportunity cost, and, for the owner, possible damage to their company.