The purchase of a business is a significant investment which should not be taken lightly. Therefore, you should understand the power and importance of asking the right questions before making a major decision. Here are 10 questions buyers shouldn’t be afraid to ask when buying a business.
- Why are you selling?
It is not too much to ask to find out the owner’s motivation for the sale. The last thing you want to find out as a new owner is that the business is failing or the market has been declining.
- What were your biggest challenges?
The answer can be anything from staffing to inventory. It is critical to know what to expect once you have taken over management of the business.
- Are you or the business in any substantial debt?
It is better to know sooner rather than later if there are any financial elements that the new ownership will inherit.
- What role or position did you hold within operations of the business?
As a buyer and potential new owner, you will want to know what role or position you will have to play once you’ve bought the business.
- Does the business have growth potential?
This ties into the first question – is the seller trying to sell the business because of financial struggles or is there room for your potential investment to grow?
- What kind of financial documents can you provide?
If a seller is unwilling to share their financial documents (although it is standard practice), then you have reason to be concerned and should not proceed with negotiations.
- How did you calculate your listing price?
As a buyer, you need to understand that there are a number of ways to calculate the worth of a business. From profit margins to potential growth, you have the right to know how this business was valued.
- Are there standard operating procedures in place?
This question covers the operations that work and what elements can be changed to fit your management style or to promote greater efficiency.
- How dependent is this business on your leadership or ownership?
If customer loyalty, for example, is reliant on the owner, and not just the brand or store, then there may be profit loss once ownership is transitioned. This question is crucial before you consider making an offer.
- Who else is involved in the decision to sell?
If you are at a meeting with only one owner, it is not too much to ask if there are additional absent parties who will have a say on the final sale. Once you are ready to make an offer, you should have spoken to every relevant party.
Buying a business does not have to feel like a daunting task. Transworld Business Advisors Houston has who can through the entire process. There are other questions that can come up during the negotiating process, which an advisor can flag. If you are in the Houston area, Transworld Business Advisors Houston today!