Every year, millions of Americans give up their jobs in Corporate America to pursue the dream of owning a business. Deciding to buy and grow an existing business is a huge step for most entrepreneurs, and it can be incredibly gratifying.
However, buying a business can take time and effort to navigate, especially for first-time entrepreneurs new to the world of mergers and acquisitions (M&A). During the beginning stages, consider seeking the help of a professional attorney or CPA to help you plan for your big move. After reviewing your finances, a financial advisor can tell you if your finances are sufficient and the timing is right for buying a business.
It’s also helpful to research the current market and trends to see what industries expect growth in the upcoming years. (You can get started by reading this Viking blog post discussing current M&A trends and which business sectors have the best outlook.)
Eventually, you will identify a prospective business and meet with the sellers. Be prepared! There are several essential questions to ask when buying a business. These include questions every buyer should ask their team of advisors, the seller, and themselves to ensure this is the right move for them.
Questions to Ask Yourself:
- Is buying the business the right decision for me?
- Does my spouse support this business endeavor?
- Does this decision make financial sense for me?
- Am I prepared to purchase, manage, and lead this business?
- What skills do I possess to run the business successfully? Which skills will I need to hire in?
- What characteristics of this business are important to me?
- What do I want to get out of this business?
- Do I have access to working capital and financing, if needed?
- Am I comfortable with the effect the business will have on my personal life?
- What will my exit strategy be?
questions to 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 toward growth or decline?
- How can I protect myself against potential lawsuits?
questions to 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 three previous years’ financials look like?
- How long have the employees worked in the business, and what are their functions?
- How reliant is the business on the owner, and how will the owner’s 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 run this business successfully?
- What is the reputation of the company in the industry and the community?
- If the owner decided to expand the business, what opportunities exist, and why didn’t they pursue those during their tenure?
These questions can serve as a starting point in the M&A process, and more questions will undoubtedly present themselves. Take the time to thoroughly investigate all aspects of the business to be sure everything is as appealing as it seems. During the due diligence period, you and your team of advisors will have a chance to analyze every facet of the business carefully, 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 essential questions now to be sure this is the right business for you.