100 Questions Potential Buyers Will Ask Startups

Thinking about selling your business? What are the questions potential buyers will ask startups?

Selling a business is often the best move. Maybe you receive an offer too good to refuse. It may be foolish or negligent not to accept offers you are receiving. You may be in a personal situation that is demanding more of your time. Exiting may be better for the business than raising another round of money.

Whichever the case is, you can still expect a lot of questions and a substantial amount of due diligence to be done by potential buyers. Here are just some of those you should be prepared for and should be discussing with your M&A advisor.

Ownership

1. Who are the owners, and how many of them are there?
2. Which shareholders may object to this sale?
3. What other stock options are outstanding?
4. Are you someone I can trust to do business with?
5. Are you someone I would enjoy continuing to work with?
6. Which owners are really influential in the ongoing success of the business?
7. What returns are current investors expecting?
8. What are the voting rights of shareholders?
9. What are the different classes of stock?
10. Where is the company incorporated?

What Happens After The Closing?

Out of the questions potential buyers will ask startups this section will tell you if this is the right buyer for your business. You want to make sure they continue to build your legacy rather than destroying it.

1. Will you accept cash or stock, or a combination of both for your company?
2. What limitations on the sale of any stock will be acceptable?
3. How much of the sales price will be tied to ongoing performance?
4. What milestones can you peg any future payouts to?
5. How many years will you stay on?
6. What is needed to keep the business growing and to be profitable?
7. Which team members are disposable?
8. How will the companies be run or integrated?
9. What limitations will there be on starting a competing business?
10. What limitations will there be on taking other team members to a new venture?

Customers

1. What types of customers do you have now (enterprise/retail/B2B)?
2. Who are your customers exactly?
3. What are your customer retention rates?
4. Can they talk to your customers and meet with them in advance?
5. What alignment or expansion opportunities are there between your businesses?
6. What customer-related KPIs are you tracking and focused on?
7. What is your cost of customer acquisition?
8. The lifetime value of your customers?
9. How are customer happiness levels?
10. What are the projections for customer growth?

Location

1. Where is your company headquartered?
2. What other offices or business locations do you have?
3. Are your staff in-house, or 100% remote and distributed around the world?
4. Why did you choose this model?
5. Are you and your team willing to move to work at a new parent company?
6. What other markets have you been planning to expand into?
7. What real estate does your company own or lease?
8. What future needs will your company have if it grows?
9. Do any of your investors or board members have specific experience in new regions?
10. What advantages in attracting talent does your location offer?

The Money

1. What’s the minimum you’ll take for your company?
2. How much are you willing to do after the sale to increase the sales price?
3. What intellectual property (IP) do you own, and what is it worth?
4. Why is buying your company cheaper and more efficient than replicating it?
5. Are you making or losing money?
6. How much money do you still have in the bank?
7. How is your business being taxed?
8. What debts does your business have?
9. What leases and other obligations does your company have?
10. What capital do you have tied up in inventory?

Integration

As part of this piece covering the questions potential buyers will ask startups I would probably say this section is one of the most critical ones.

1. What about your company will make integration easier than with a competitor?
2. What laws or legal barriers might there be to prevent or be a hurdle to merging?
3. What compliance issues need to be checked off to ensure a clean acquisition?
4. Are there are contracts that could be a burden for a new buyer?
5. Are there any pending regulations that could alter the business in the near future?
6. What team members are essential to keep on?
7. How will your team be blended with theirs or not?
8. Will there be any seller financing or other terms tying your performance and integration together?
9. What tests can you do in advance to gauge integration?
10. What can be done to prep teams in advance?

Company Culture

When thinking about the questions potential buyers will ask startups this is a good follow up to the integration section.

1. Where are your companies aligned with culture?
2. Where are there gaps and differences in culture?
3. What cultural elements do your brands share for customers?
4. What are your company values?
5. How have these values evolved over time?
6. Do you have different cultures in different office locations?
7. What is your company’s reputation in the world?
8. What do your online reviews say about you according to customers and employees?
9. What do your job ads and wages say about your company and its future?
10. What will the impact of taking on your company be on the acquirer’s culture?

Team

1. What will happen to your team members in this M&A deal?
2. What roles will there be for your cofounders?
3. What will the returns be for any investors in your company?
4. How much will be set aside for salaries and compensation packages?
5. What will happen to any stock options?
6. How will this transaction be impacted by vendors and suppliers?
7. How important is the financial exit for your staff in this deal to you?
8. What team members can the buyer offer to help boost your business?
9. What tools can the buyer offer to help your business unit grow?
10. What pending recruiting needs are there?

The Outlook

1. What is the market size of your space?
2. What is your company’s total addressable market out of the whole space?
3. Is your model ready to scale?
4. What threats are there to your business and its growth?
5. What new innovations are in the pipeline to stay ahead of the competition?
6. What regulations could help or threaten your business projections?
7. What factors could help bolster your growth?
8. Which investors may continue to want to participate in new rounds of funding?
9. Who may also want to buy this company or both of your ventures packaged together?
10. Which brand will be the dominant one in a merger?

Strategy

1. How might this acquisition improve customer acquisition costs on both sides?
2. How will this deal improve profitability for your buyer?
3. What other benefits of scale might this deal produce?
4. Are there any assets or business units that should be excluded from the deal?
5. What do you see as the best deal structure for taxes?
6. Should the numbers in the deal be made public, and when?
7. What doesn’t the buyer know that could justify a higher price?
8. What risks are there to this buyer if you sell to someone else?
9. Is there another form of partnership which would be more time and capital efficient?
10. What other companies could you buy to make your company more valuable?

Summary

Nailing these 100 questions potential buyers will ask startups will put you in a position of strength when dealing with potential acquirers. 

Also, make sure that you have a killer acquisition memorandum so that your business is presented in the most powerful way. For a winning acquisition, memorandum template take a look at the one I recently covered (see it here) or unlock the acquisition memorandum template directly below.

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