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50 Questions You Must Ask When Buying a Business

 

  1. The first and most important question is always “why are you selling the business?” Get the wrong answer you walk away.
  2.  Of course, if you don’t already know, ask the selling Price.
  3. The location of the business. The old maxim says “Position Position Position”
  4. How long has the owner had the business?
  5. How many hours a day/week do you, the owner, spend at the business?
  6. Are there any great challenges to the business right now? Be aware of mine fields.
  7. Are you the biggest asset in the business?
  8. Are you the decision maker for the sale of the business or are there others involved?
  9. When was the business first established?
  10. Do you know how many times the business has been sold?
  11. Who runs the business when the owner goes on holidays? Can the staff run it?
  12. How much does the business depend on a small number of customers? The business might be successful, but if one or more important customers are lost directly after the sale, the value of the business will plummet.
  13. Together with the above: Who are your biggest customers?
  14. You say you are at the business most of the time, but can it be converted into an employee driven business? Who runs it when you go on vacation?
  15. What particular skills will I need to run this business effectively?
  16. Are the employees aware the business is for sale and do you know of their intentions after the sale?
  17. Is the business currently running in profit or loss?
  18. How much do you, the owner, draw out of the business including perks?
  19. Can I please have a list of your biggest competitors?
  20. Do you mind if I contact some of your biggest competitors on a confidential basis without mentioning you are selling? This may be problematic.
  21. Do you have one main staff member who is able to be the manager?
  22. Do you have any family members or good friends working with any of your main customers? If there are any it could be a problem.
  23. Do you have any family members or good friends working with any of your major competitors? Likewise, also could be problematical.
  24. What is your background in this type of business? Is mine sufficient?
  25. How will the financial records, which you will show me, be documented?
  26. If the financial records do not document some of the claimed revenue, how will you establish its existence? Be careful asking this question.
  27. Does the business have any past, pending or future law suits?
  28. Are the business systems and procedures documented?
  29. At this point ask yourself “am I really interested in this type of business?”
  30. Ask yourself if this is a good strategic move for you; or is this business just an opportunity. If it’s the latter, perhaps you should look elsewhere for comparison purposes.
  31. How soon can we close the deal after the price is agreed?
  32. Do you have any suggestions how the business can be expanded?
  33. How much extra funding may be needed for that expansion?
  34. Can I see the ‘memorandum of sale’ in full? And the contract of sale.
  35. Is the cash flow sufficient to meet the bills on time each month?
  36. How much buffer is there in the cash flow?
  37. How many other buyers are you currently negotiating with?
  38. Will you be assisting with any of the purchase price?
  39. Ask yourself whether your family is on-board with purchasing a business of this type and hours of operation.
  40. What are the hours of operation of the business?
  41. Can I realistically afford this business? Over 80% of small businesses are vendor financed. Only buy what your finances will allow or it will be an expensive pipedream.
  42. Are you willing to put a non-compete clause in the contract-for-sale?
  43. Can myself and/or others spend time observing the business on a daily basis, prior to our decision?
  44. Do you have a timetable for the transition?
  45. Are there any unusual zoning laws governing this business?
  46. Are you aware of any major changes to this location; such as a new development proposed which may impact the business?
  47. How did you handle the downturn in the economy back in 08-10?
  48. When did you decide to sell the business? This is an important question, because if the owner has been thinking about retiring for sometime, it’s a good thing. But if the decision was sudden, it may be a red flag to be wary of.
  49. What method of valuation did you use to calculate the selling price? Include your CPA and/or business broker for advice here.
  50. Can I please have all of the answers to my questions in writing?

 

Featured Brokers

Advanced Business Brokerage Virginia, USA

National Business Brokers Consultants Colorado, USA

Pacific M&A And Business Brokers Vancouver, Canada

 

 

 


April 3, 2011
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