5 Questions to Ask the Owner Before Buying A Business

As with any investment, buying a business takes a certain amount of due diligence and research. Before you sign on the dotted line, though, it’s important to know as much as possible about the business from its owner. This means learning more than what’s included in their listing, like asking price, industry, brand name, number of employees, and more. It also means asking those uncomfortable questions, like “what would you have done differently if you could start the business over?”

If you’re heading into a prospective meeting with a business seller, be sure to ask these questions:

1. What would you have done differently? A seller’s response will offer you particular insight into their business. Was there a mistake they made that cost them big – like a lawsuit? Did they want to develop a new product line that they knew would be successful, but just couldn’t find the time? Or, do they regret not spending enough time with their family? This insight will allow you to see the business from an internal perspective.
2. How did you asses your asking price? Know firsthand if the price they’re asking is based on personal reasons – like what they need to retire – or because of a true business projection. If it’s an arbitrary price, you’re more likely to be able to negotiate. To get a better understanding of the company’s true value, ask to see tax records, revenue, sources of income, and profit and loss statements.
3. Has the company ever been sued? Or could you potentially be facing a lawsuit? A lawsuit can cripple a company, and it’s probably the last thing you want to come along with your new business. Have the owner put their answer in writing so you can reference it – if needed – down the line.
4. What are employees planning on doing after you leave? To some employees, the selling of their employer’s company can spark a range of emotions in them. Some may feel entitled to own the company themselves, so be cautious of any changes in staff. If some employees are planning on leaving, have them sign non-compete and non-disclosure agreements so you suddenly don’t have new competitors.
5. What’s required of the owners of this company? Does the owner play a particular role in this company or require a certain personality type? If you’re introverted, be mindful of any responses that include extroverted traits, like meeting and talking with guests, winning new accounts, or rallying the troops for a sales meeting every morning. Filling the shoes of any owner can be hard; filling the shoes in a role you were never made to play can be even harder.