Questions to ask when buying a business

03 Jan Questions to ask when buying a business

At Venture Advocates, we like to sit down with our sellers and create a video that truly interested buyers can watch. Often this video will answer many of the questions that a buyer has about the business they’re considering purchasing. However, on the off chance you’re out there on your own talking to a business owner, here are questions you may want to ask:

1. What’s the history of the business? How long has it been around and how long has it been with the current owners? Knowing if the business is well-established in the community may help you determine or at least infer how long its likely to last and how loyal customers are to it.

2. Is there much competition? Finding out about competitors in the area is key. Just as you would when considering opening a brand-new business, knowing the competition is part of how you stay successful. If you hear from the owner that there are 20 other successful businesses similar to his in the area, you may want to reconsider. On the other hand if the business is a coffee shop and one of the few that provides cold-brew coffee, having other coffee shops around may not matter.

3. What marketing do you do for the business? This can tell you a few things. If the owner says, “Well we’ve hung on for a few years but we’ve done NO marketing,” then you know that by simply adding that piece of the puzzle you may be able to grow the business. If the owner says “Oh we’ve done X, Y, and Z for years and we see growth year after year” then you know that those marketing pieces should continue if you decide to purchase the business.

4. What’s your customer base like? Knowing if a company has loyal, repeat customers tells you many things. It tells you that the work or services provided by this company are solid and dependable; it tells you the staff here obviously has done a great job with customer service; it also tells you that you’ll have some work to do assuring those customers that things will be just as great once you take over.

5. Tell me about your employees. Depending on how serious you are about buying the business, the owner may share a little or a lot here. Usually owners seem willing to let potential buyers know how awesome their employees are. These employees can be a great asset to you, especially if they’ve been with the company a long time.

6. What’s included in the asking price? What assets are there? Is real estate included? You’ll of course want to know if this business purchase includes acreage and a structure, or if the space is rented and the transaction includes only inventory and such.

As you get more serious about purchasing a business, other questions you should ask, or that your brokerage team should provide answer for include:

• Annual gross revenues and net profits for the past 2 years

• Is Seller Financing available and if so what are the terms?

• Is the owner willing to stay and help with transition and training and if so, for how long?

If you’re considering buying a business, give us a call at (970) 255-8000 / (800)499-4270. We’ll walk you through the whole process and help you find a business that’s right for you.