5 Questions To Ask When Buying A Business

Aiden Sookdin, Author, The Minimum Wage Millionaire, 23 Feb. 2016

Tags: buying a business, entrepreneurs, business owner, purchase business, buy business



Are you thinking of purchasing a business, but aren’t fully convinced it’s the right thing to do? Don’t give up hope just yet! Instead, make sure you’re prepared when meeting a seller face to face and take the time to come up with a list of possible questions to ask. This will ensure that the decision-making and buying process runs much smoother and that you don’t make a serious mistake you’ll end up regretting later on.



Here is a list of questions you should ask before buying a business:
 
1. Why are you selling the business?
This is, without doubt, the first and most important question to ask when meeting the business seller. You need to know the real reasons, so be sure to dig deeper if you feel like his answer is rather superficial. The owner may sell the business for various reasons: illness, lack of resources, divorce, wanting to start another business, etc. Make sure you find out why he has reached this decision. Be ready to ask additional questions if necessary, in order to discover possible areas of concern.
 
2. How did you reach this selling price?
You may have your own methods of measuring a business’ worth, while the owner may have his own set of rules.
 
3. How has the business evolved in the last few years?
The business owner must provide a complete company history, with dates and supporting documentation, and he must explain all the development and marketing strategies used in the past years. If the business has clearly changed course over time, ask him why that was. How is the brand perceived on the market? Who are its main competitors and how does the company manage to stay ahead of them? Don’t forget to ask for all cash flow ad balance sheets, and financial statements for the last years.
 
4. Is there anything I should worry about?
Business sellers will do everything in their powers to make the venture seem as profitable as possible and will highlight strengths, while forgetting to mention weaknesses. You need to find those weaknesses by asking the right questions. Don’t settle for inconsistent, superficial answers. Remember that you hard-earned money is on the line here. Find out if the business has faced any troubles with the authorities or its competitors, if the owner has ever had financial trouble, and so on.
 
5. Who are your customers and how do you keep them satisfied?
Be sure to find out everything there is to know about the business’ target market. Who are these customers, what do they want and need? Has the business managed to keep them satisfied and loyal? Which customer engagement strategies have worked so far? You need to know which mistakes to avoid doing and which strategies could be used again.
 

Related QA

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danielmeyer asked:
What are the most effective ways to determine the market value of a business? [read more]
Published at 15 Apr. 2013 in: Management Market value Valuating a business Buying or selling a business 1 Answer


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