4 Questions to Ask When Buying a Business

Buying an existing business may be an option for entrepreneurs looking to expand or start a business. When you purchase a business for sale, you have the option of building upon an already successful business or turning around a struggling enterprise. It’s important to make sure you’re buying a potential cash cow, not a sinking money pit.

Therefore, you must do all of the necessary research and prepare a list of questions for your business broker. By going through the due diligence process, you will be better prepared to negotiate, and you will avoid any mistakes or roadblocks.

When buying a business, here are the best 4 questions to ask.

1. What is the reason for selling?
Why is the owner selling the business? This is one of the most important questions to ask your business broker. This is a simple, yet blunt question that gets right to the point. The answer they give may just be that the owner is retiring or starting something new, but if it seems like they are avoiding something or being untruthful, that may be cause for concern.

2. What are the biggest challenges facing the business?
In taking on a business, you must be aware of any and all challenges it faces. Ask questions relating to the market, competitors, product standards etc. Understanding the challenges can help you find the answers or how to turn it into a successful business.

3. How Did You Arrive At Your Valuation?
This is an important question to ask as it will give you an insight into everything the business owns (equipment and inventory) any debts and liabilities, and how much does the business generate in annual sales?

4. How are the business’s finances?
You should always review the business’s current financial statements, balance sheet, and tax returns as a prospective buyer. Ensure that the business isn’t hemorrhaging money, which would leave you with a money pit.

The key takeaways
Buying a business is a tricky venture. It cannot be done on a whim or without extensive research. If you do your due diligence, ask the right questions, and work with a professional, experienced, and truthful business broker, you can find the diamond in the rough among many underperforming businesses.

If you’re looking for a business broker who has your best interests at heart, you came to the right place. Contact us to make an appointment with one of our brokers.