Questions To Ask Before Buying A Business

Buying a business is your opportunity to do what you love, so your passion for a specific industry should be one of your primary objectives when looking for a business.

Buying an existing business is not the same as starting your own, it’s difficult. Unfortunately, it doesn’t always work in your favor. It often takes hard work and determination to create a thriving business poised to become the next big success story. These are questions you should ask when buying a business.

1. If I am actively considering a specific business opportunity, have I assembled an acquisition team with my banker, accountant and attorney?

2. How long has the business been operating?

3. Why does the owner really want to sell the business?

4. What assets are transferred with the business? (Does there seem to be more fixed assets than it warrants?)

5. What areas of the business are systemized?

6. How much inventory is there? (For a business that sells a product, excessive inventory is a red flag.)

7. Who are the key customers, suppliers, and staff?

8. How dependent is the business on the current owner?

9. Will the owner help me learn the business and give operating help, at least for a while?

10. What aspects of the business are most critical to its survival?

11. How much cash does the owner need up front?

12. What is the best way of financing this purchase? Will the owner help with financing (for example, through leveraging the buyout)?

13. Is the owner willing to show me projected financial statements as well as the past
Three years’ balance sheets, income statements, cash flow statements and tax returns?

14. Has the company or its principals been involved in bankruptcies or lawsuits?

15. What facts support the “story” of the business?