7 Key Questions Buyers Should Always Ask

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7 Key Questions Buyers Should Always Ask Before Acquiring a Business

Discussing these questions with the help of an intermediary can prevent later confusion and heartache once the deal has been done.

Happy Couple And Mature Consultant Discussing Together

When buying a business, you can never ask too many questions. Before acquiring a company, it is imperative to know it inside and out. There is a multitude of questions to ask about a business that will allow you to make an informed decision. Acquiring a business without full knowledge of aspects such as financing, employee relationships, and growth potential can lead to hardship and even failure later down the road. Even though the amount of questions to ask is virtually unlimited, there is vital information that you need to know first and foremost. We have provided a list of questions that need to be asked right off the bat when vetting a business. Discussing these questions with the help of an intermediary can prevent later confusion and heartache once the deal has been done.

Why are you selling?

The most important question as it is very telling into the owner’s insight. Every business owner is different when it comes to the reasoning of why they want to sell their business. Buyers should pay close attention to the motivating factors as to why the seller wants to sell. There are numerous reasons why an owner would want to sell their business. The seller should be confident and comfortable when presenting their exit reasons.

Who are the key employees within the company? Will they remain with the company?

Understanding who is most involved within the company is necessary to know before even thinking about making a deal. Once the business is passed on to a new owner, having key employees on hand to provide a smooth transition is paramount. Employee relationships and agreement among partners is essential in a drama free transition. Scoping out the leadership dynamic of the company is a smart idea when first inquiring about a business. Buying a business entails building new relationships among the people who have greater experience in working with the company.

What is the growth potential like?

The goal of many potential buyers and future business owners is to grow the company to a larger and more profitable point after they have acquired it. Buyers usually look for tendencies in profitability of the business, as well as sales and gross margin. Finding out the status of these trends is crucial and can potentially help predict the future income of the business. It is important for the seller of the business to present the most viable expansion opportunities before moving forward.

What opportunities exist in this market in the years ahead?

The future of an industry can change immensely based on economic, social, environmental, technological, and demographic trends. These trends vary depending on the industry can help determine the market in the years ahead. Paying attention to these trends as well as projected revenue for the following year can predict the status of the market and what opportunities might exist in the future. Getting the sellers honest feedback on growth opportunities is key to the decision making process.

What are the various kinds of problems that arise in your business? How are these handled?

The problems associated with a business often speak much louder than the advantages. You want to be aware of potential red flags and how these could affect certain business aspects later down the road. Being concerned about risk factors such as poor bookkeeping, potential lawsuits, or inaccurate financials associated with the company can prepare you for potential road blocks in the future.

How well documented are the financials of the business?

Make sure to be informed about the financial organization of the business before moving forward. Although the truth will most likely be presented during due diligence, it is important to touch on the management of statements and financials. Learn more about the importance of well-organized bookkeeping, and how inaccurate status and accessibility of the company’s books can be a major deal killer.

What skills do I need to have to run this business adequately?

If you do not possess certain skills that are associated with the business, you might have a challenging time adjusting. However, there are many instances in which the buyer is capable of learning the necessary skills needed to maintain the success of a business. Scoping out the dynamics of the company can determine what skills and leadership qualities are needed to run the business effectively.

Other important questions to consider:

What will happen when others realize you have sold the company?

Do you have any past or current lawsuits?

What does your ideal succession plan look like?

Who are your primary competitors?

What are you able to accomplish for your customers?

As for the seller, it is critical to be honest with potential buyers in discussing questions about your business. Preparing for and responding to these questions as accurately as possible is extremely important. If you aren’t completely upfront and open from the beginning, it will not be long before the buyer finds out the truth during due diligence. If you sincerely explain how the business works, you will likely find the right buyer and plan your exit on stable terms. Viking Mergers & Acquisitions can assist you in finding the right buyer for your business and help you with your succession plan. Contact Viking today and request a professional valuation of your business.

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