What questions should I ask when buying a business?

Most business buyers don’t have a shortage of questions they want to ask when they are looking to buy a privately held company or business. There are obvious questions about the level of sales, qualifications and motivation of the employees, the relationship with the landlord, if payment to suppliers is up to date and many other good and appropriate questions.

Apart from these questions, there are others that may help a buyer decide if the business is a good fit for them. These questions include the following:

1. Does the business have any tax liens in place and are there any tax liens against the owner?

2. Does the business have any lawsuits pending?

3. How diverse is both the customer and supplier base?

4. What’s the reason the owner wishes to sell?

5. Is the business in, ever been in or likely to go into Chapter 11 or Chapter 7 bankruptcy?

6. Is the lease transferable and is there a cost to transfer the lease?

7. Are the employees unionized?

8. How could the business be expanded?

9. How could the operations of the business be improved?

10. Has there been any negative press on the business or the industry?

11. Has there been any recent change or upcoming changes that could have a negative impact on the business?

12. Does the business have a good management team or key employees in place?

13. Are there written operations and training manuals that are up to date?

14. Who prepares the financial statements of the business and what certified professional assistance is used?

15. What is the role of the seller in the business on a day to day basis and what documentation exists about the role they play?

A buyer has many questions to ensure they feel comfortable about the business they are buying. The questions are not just about what, where and how the seller is involved in the day to day operation of the business, but about the skills and expertise of the buyer and whether they think they can replicate what the seller does so the business doesn’t decline. There is a saying – no question is a stupid question – and this especially applies when buying a business.