43 Questions to Ask When Buying a Business

Kristin Eriksen

Kristin Eriksen

Content Marketing Specialist

March 21, 2018

43 Questions to Ask When Buying a Business

Kristin Eriksen, Content Marketing Specialist
March 21, 2018


Buying a business?

Identifying the right questions to ask when buying a business is a key part of the due diligence process. Making the necessary inquiries increases the chances that you will pay a fair price and obtain the business of your dreams. You’ll need to question yourself and the seller to determine whether the business is one that can be operated profitably.
Failing to ask the right questions when buying a business can lead to the nightmare scenario of overpayment and inheriting problems that you didn’t anticipate. You should leave no stone unturned when asking questions about the health and viability of a business you’re considering buying.

Whether you’re contemplating buying a small, medium, or large business, you still need to have a list of questions to ask. Buying small businesses could be a smart choice for would-be entrepreneurs because of the number of available small business. According to the Small Business Administration, since 1982, the number of small businesses in the US has grown by 49%.

Buying an established business is appealing because it may be easier than starting from square one. However, the benefits of buying an existing business can only be realized by taking the necessary steps and making the right inquiries. If you are considering buying an existing business, think about using the services of business advisers like brokers, lawyers, and accountants.


43 questions to ask when buying a business

Even before seeking out business advisers, position yourself to gain the most out of the buying process.The following list of 43 questions to ask when buying a business will assist you in making the right decision. We’ve broken down the following list into different categories below.

Jump to category:


Initial questions to ask yourself when buying a business

Buying a business is a big commitment and requires deep questions to determine whether you’re genuinely interested in that particular business. Your interest in a particular business needs to be combined with the potential for a healthy profit.

Ask yourself the following questions to find out whether you actually are sold on the business or whether you just like the idea of it:

1. Does the business have longevity? Buying a business based on a current trend could be exciting, but you must ask yourself whether there will be demand for the products and services in years to come.

2. Will I be happy doing this all day? Your idea may be to buy a business and hire a manager for the day-to-day operations. However, you’ll still need to be heavily involved in the business, especially in the early days.

3. What exactly am I buying? There are several structural options available when buying a business including a corporation, entity or just assets.

The initial questions to ask when buying a business involve answering on a gut level. You should be brutally honest with yourself to avoid making a mistake. Here are some more questions to ask yourself when contemplating buying a business:

4. What is my motivation for buying this business?

5. Would it be easier to start a similar business on my own?

6. Do I have enough experience in this field to make this business work?

7. What do I know about the competitors?

8. Am I planning to buy this business on my own or will I need a partner?

9. Can I really afford to buy this business considering my other financial commitments?

10. Can I make a comfortable living from this business?


Initial questions to ask the seller when buying a business

Just as there are some initial and basic questions you should ask yourself, there are also some elementary questions you must ask the seller when buying a business, including:

11. Why has the seller put the business up for sale?

12. What exactly does the business do?

13. What year did the business start to operate?

14. What is the history of the business?

15. How long has the current owner been operating the business?

The answers to these questions will give you an indication of whether you want to proceed, but you should be aware that the owner may not be entirely open about some answers. For instance, it’s unlikely that the owner will be forthcoming about poor business performance. You’ll need to be on alert for red flags (which could include evasive answers) to determine whether the business opportunity is worth pursuing.


Questions to ask about the company’s financial performance

It’s time to make further thorough investigations into the company’s financial performance, once you’re satisfied with:

  • Your answers
  • How the business owner addressed your questions

The relevant documentation should provide answers about the financial state of the business. However, you should first ask the business owner questions about the company’s financial performance. Important questions to ask about the financial state of the business include:

16. Can the owner provide evidence of the gross revenue of the business for the past three years?

17. What were the yearly net profits of the business for the past three years?

Proving the company’s financial performance shouldn’t be skimped on and you should be at liberty to ask all the necessary questions and examine as many documents as possible to help in your decision-making process. Relevant documents that may help to paint a picture of business performance include:

  • Profit and loss statements
  • Bank statements
  • Supplier contracts
  • Lease agreements

Financial statements should be readily available and presented to you in an organized way. Missing documentation or slapdash record-keeping could be a warning sign indicating that the business may be experiencing financial issues.


Questions to ask about the value of the business

The amount you pay for a business and its assets will impact on your potential success. If you pay more than you can afford and the business fails to make the necessary profits, you could lose it all. The aim is to pay a fair price that you can afford and won’t result in you being financially strained. Ask the following questions to determine the price of

Important Notice
The information contained in this article is general in nature and you should consider whether the information is appropriate to your needs. Legal and other matters referred to in this article are of a general nature only and are based on Deputy's interpretation of laws existing at the time and should not be relied on in place of professional advice. Deputy is not responsible for the content of any site owned by a third party that may be linked to this article and no warranty is made by us concerning the suitability, accuracy or timeliness of the content of any site that may be linked to this article. Deputy disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on this information.


SHARE THIS POST
comments powered by Disqus
ABOUT THE AUTHOR
Kristin Eriksen
Kristin is a creative and results-driven content specialist. She is a recent grad from Florida State University with a degree in Information, Communication and Technology. In her spare time, she enjoys reading a good book, the sounds of a great playlist, and seeking adventures in the outdoors.
SIMILAR ARTICLES

More than 165,000 workplaces have used Deputy. Subscribe to learn why.
TRENDING ARTICLES

Never miss a beat!

More than 165,000 workplaces have used Deputy. Subscribe to learn why.