Buying a Business? Ask the Seller These 5 Questions First
If you are considering purchasing a business, you have some homework ahead of you. You need to do some digging to ensure that you are spending your money wisely and that the company is a good investment. Asking the right questions now can go a long way toward learning whether this particular business is the right option for you.
- What do you think makes your business successful?
Some business owners are so essential to their business that it simply cannot survive without them. When people come to a store just to see the owner or because the owner’s food is second to none, you may have a problem. If you change ownership, it may not matter how good you are or how similar you keep the company—when the lifeblood of the business is gone, so is the business.
You can also talk to current customers to see what keeps them coming back. You can not only learn about what the customers enjoy now, but you can also discover where you can expand and areas that are apparently already working. Meeting your customers face-to-face is a good idea for any potential business owner.
- Do the financials seem sound?
Take a critical look at the books and records. Does the owner have all of the information you need to determine whether this business is a good investment? If files are in a shoebox, that could mean there are problems that even the current owner is unaware existed.
Keep in mind that not every small business is going to keep the kind of in-depth records you may want as a buyer. You will need to get creative to find the information you need. Perhaps looking at inventory records or timecards will give you an idea of what products or services are the most successful or sought after.
- How much time are you putting into the business?
Some company owners practically live at their business. They spend so much time making sure that company thrives that they don’t have a life outside of the company. This can be a real problem if you are not willing to devote the same time and effort after you take over. It may also signal that you need to make some personnel additions or changes to account for your different management style.
- Why are you getting out of the business?
There may be a concerning reason that the current owner wants to leave the business. Have they burnt out? Is the company in financial trouble? Has the company grown to an unmanageable level “as is”? If the owner just wants to spend more time at the golf course, that may be a sign of a healthy transfer. If an owner is feeling overwhelmed or burnt out, that could be a sign of problems that you need to investigate more.
- What are your biggest challenges right now?
This question says a lot about a business. Depending on the response, it could signal internal turmoil, or it could help you anticipate external factors that you are going to have to address as the new owner. It also gives you an idea of whether the current owner has been able to notice and address problems areas in the past.
Buying a business is a big decision, and it should not be taken lightly. Doing some investigation beforehand can save you a lot of time, headaches, and financial losses after your purchase. If you want to ensure that you are making the right decision, run the idea past the team at Maxwell Dunn, we can do an audit that can help problem areas before your purchase. Call us at (248) 936-6390 today.See all videos