Are you considering buying an existing business? It can be a quick and effective way to enter a new business venture. However, it also means taking on the operations, processes, and finances that another small business owner has established. Due diligence is key to protecting your investment. By asking the right questions, you can ensure a smooth start to your business ownership journey.
If you’re interested in learning more about buying an existing business, you can download a free copy of the BizBuySell Guide to Buying a Small Business. The BizBuySell Find a Business feature can help you discover small businesses that you might want to purchase. And, if you’re looking to sell your own company, check out the BizBuySell Guide to Selling Your Small Business.
Here are some essential questions to ask business owners when considering buying an existing business opportunity:
Preliminary Questions for the Seller or Broker
- Why Do You Want To Sell?
- What’s Your Asking Price — and Why?
- How Negotiable is the Final Purchase Price?
- Would You Be Open to Seller Financing?
Ask the Seller About the Revenue Stream
- What are your Total Revenues Annually?
- How Much is Your Operating Cash Flow?
- Can You Share any Annual Cash Flow Statements?
- What are Your Total Annual Sales?
Ask About Potential Red Flag Issues
- Can I See Your Financial Statements and Balance Sheets?
- May I Speak with Some of Your Employees?
- Do You Have Any Customers or Clients I Could Interview?
- What Can You Tell Me about the Business’s Annual Tax Returns?
Ask About Assets and Capital
- How Much Working Capital Does the Business Have?
- What Real Estate, if Any, is Included with the Business?
- What Equipment, If Any, is Included with the Business?
- What Vehicles Does the Business Own to Help with Operations?
- What Furniture or Fixtures, if Any, Are Being Sold with the Business?
- What Inventory for Resale, if Any, is Being Sold with the Business?
Question Seller about Their Position in their Industry
- What Brand Recognition Does Your Business Have in the Marketplace?
- What Market Share Does Your Business Have in the Industry?
- Who Are Your Biggest Competitors?
- What Makes Your Brand Stand Out?
Check Out These Important Questions for your Lender
- Do I Qualify for a U.S. Small Business Administration Backed Loan?
- What Rate Do I Qualify For?
- How Much Do I Need Up Front?
- What Are My Alternative Funding Options?
Ask These Questions About the Management Team
- What Is Your Management Structure?
- Will the Management Team Stay in Place?
- How Involved Are You in Managing the Business?
- How Does Your Team Handle Management Challenges?
- What Changes Would You Make to the Management Structure?
Ask These Questions about the Company’s Biggest Challenges
- What Has Been Your Biggest Challenge in the Past Year?
- What Does Your Team Do When Facing a Challenge?
- What Challenges Are You Currently Facing?
- What Challenges Have You Identified Moving Forward?
Ask About Day to Day Operations in Detail
- What Does a Typical Day Look Like for You?
- What Does a Typical Day Look Like for Employees?
- What Are Some Essential Tasks That Must Be Completed Regularly?
- What Systems Do You Have in Place?
Ask These Questions About the Business’s History
- How Long Have You Been in Business?
- How Long Have You Owned the Business?
- What Has the Company’s Growth Been Like?
- What Has Been the Biggest Factor in Your Success?
Ask These Questions as Part of Your Due Diligence
- May I Review Your Vendor Information?
- What Are the Company’s Current Contracts?
- Is the Business Involved in Any Ongoing Legal Conflicts?
Ask These Other Miscellaneous Questions
- What Marketing Strategies Do You Use?
- Do You Rely Heavily on a Few Major Clients?
- Do You Belong to Any Industry Organizations?
- Does the Company Have Any Debts?
By asking these questions and conducting thorough due diligence, you can make an informed decision when buying an existing business. Remember, it’s essential to protect your investment and ensure a smooth transition into business ownership.