5 Essential Questions when Buying a Business

5 Essential Questions when Buying a BusinessFor those who are looking to buy a business, there are two kinds of questions.  There are those which have easy answers that present the business in a favorable light.  Then there are others which may provide more information about the motivations of the seller and the shape of the company.  The following five questions can provide invaluable insights into the business for sale.

A typical question asked when examining a business is why the owner is selling.  A variation of this question can provide more information; when did the seller decide to sell their company?  If the business is thriving, the owner may take a long time to decide, whereas a quick decision can be due to a sudden health concern of the seller, their family or their business.

Another step in the course of purchasing or selling a business, a business valuation must take place which dictates price based on assets, income, or a multiplier valuation.  Finding out the way the seller appraised their business can assist in the negotiation process.

Another question which can assist in negotiations is concerning the seller’s ideal result of this transaction.  It is not necessarily true that the seller only wants as much money as possible.  Sometimes the seller also wants to ensure the success of the business moving forward or the workplace of their employees.  This information can make consummating a deal harder or easier depending on the beliefs of the buyer.

In order to receive an accurate representation of the future of the company, a good question to pose asks what the seller would do to grow the company.  With their intimate knowledge of the business, they should be able to outline the potential for the company. If they implemented these strategies and what stood in their way, then you won’t make the same mistakes.  If there has been a history of failures, then the business model itself might be flawed and need to be reassessed.

The last question is regarding a signature on a non-compete clause.  This will either protect the buyer’s new customer base or show the seller’s intentions of taking that business’s existing customers.  Another important step to protect your assets during an acquisition or sale of a business is to consult a legal professional.  Contact an experienced business law attorney in Naperville who can negotiate favorable terms.