Crucial Questions to Ask When Buying a Business
Key Questions to ask yourself, professionals and sellers now to secure your future business.
Every year, millions of Americans give up their jobs in Corporate America to pursue the dream of owning a business. Making the decision to buy and eventually manage an existing business is a huge step for most entrepreneurs, but can be incredibly rewarding. Our economy continues to flourish and recover from the recession and experts are predicting a spurt in business sales due to our aging baby boomer generation. These factors aligned might just create the perfect moment you have been waiting for to explore the option of purchasing a business.
The process of buying a business can be tricky to navigate, especially for first-time entrepreneurs that are new to the M&A world. During the beginning stages, you might consider seeking the help of a professional attorney or CPA to help you plan for your big move. After reviewing your finances, a professional accountant should be able to tell you if the timing is right for you to buy a business and if you are financially able. You will also want to spend some time researching the current state of the market and trends to see what industries are expected to grow in the upcoming years, so that you can be sure your dream business is headed for success. Finally, after researching and preparing, it will come time to meet with sellers – be prepared! There are several questions that every buyer should ask their team of advisors, the seller and themselves to ensure that this really is the right move for them.
- Is buying the business the right decision for you?
- Does your spouse support your business endeavor?
- Does this move make financial sense for you?
- Am I prepared to purchase, manage and lead this business?
- What skills do I possess to successfully run the business? Which skills will I need to hire in?
- What traits of this business are important to me?
- What do you want to get out of this business?
- Do you have access to working capital and financing, if needed?
- Are you comfortable with the effect the business is going to have on your personal life?
- What is my exit strategy going to be?
Ask a Professional
- Is this a good time to buy a business?
- Can I make a living and pay for the business?
- What do the financials show for this business?
- Is this business on a path towards growth or decline?
- How can I protect myself against potential lawsuits?
Ask the Seller
- How long has the company been in business and how long have you owned it?
- What role does the owner play in the business including day-to-day duties?
- How many hours a week does the owner spend on the business?
- What do the 3 previous year’s financials look like?
- How long have the employees been working in the business and what are their functions?
- How reliant is the business on the owner, and how will their exit impact the business?
- What are some of the main challenges the owner has faced and how were they resolved?
- What skills or qualities do I need to successfully run this business?
- What is the reputation of the business in the industry and the community?
- If the owner decided to expand the business, what opportunities exist and why didn’t they during their tenure?
These questions are meant to serve as a starting point in the M&A process, and more questions will undoubtedly present themselves. Take the time to fully investigate all aspects of the business to be sure everything is really as wonderful as it appears. During the Due Diligence period, you and your team of advisors will have a chance to carefully analyze every facet of the business, so take this time to ask plenty of questions regarding equipment, assets, seller training period, employees and finances. As you prepare for an exciting new chapter, ask the important questions now so that you can be sure this is the right business for you.