Key Questions to Ask When Buying a Business

October 2022

Buying a business has become a challenging task today with risks and liabilities. It can be challenging for both parties. The process of due diligence is vital before the sale goes through. Having an objective intermediary involved is essential to provide honest transparency.

First Choice Business Brokers are your best bet in Ohio. With an expert team of professionals who advocate for transparency and due diligence, both parties are well-protected and well-informed about each other.

Why Are You Selling Your Business?

Knowing why the owner is selling will help a buyer understand the owner's level of commitment to the company. It can be anything from retirement to health concerns. But there could be red flags in financials, bad reviews, or even legal issues.

You can't count on all sellers to be open about specific issues. While many are, some are not so you need to do your research. Negative discoveries are common, so the buyer must look into every aspect to uncover the truth.

How Did You Arrive at the Business Valuation?

Business valuation is a vital aspect of the selling process, and often a source of disagreement. The buyer is entitled to know how the owner arrived at a specific business valuation. The chosen valuation relates specifically to the sales strategy. The prepared seller should have metrics and data prepared to support the valuation number during negotiations.

Often a mix of standard methods is used. The bottom line is the valuation is about how much a seller is quoting and whether they can justify their asking price.

What Kind Of Assets and Services Are Included In the Sale?

A buyer always needs specific information about physical (tangible ) and goodwill assets (intangible assets). An experienced owner knows to be clear about holdings because they have taxation implications for the seller. Sharing this information makes common sense. Any reluctant seller should raise red flags for the buyer.

First Choice Business Brokers actively encourage a seller to identify all tangible or intangible assets because they should be a positive point in negotiations. If not, there is something amiss.

Do You Think I Can Contribute To This Business?

A competent seller invested in the success of their business will ask the buyer for a resume as a part of their due diligence process. So this is an excellent question for a buyer to ask the seller. Because who knows best what it takes to run this business? Of course, it's the seller who will know a well-matched buyer. However, something has brought you this far to the bargaining table, so you are part way there to ensure this business is an excellent match to your skill set.

First Choice Business Brokers take great pride in a reputation of finding excellent matches of buyers and sellers. This is what we do!

Who Are Your Top Competitors?

As a buyer, you have done your research on the business and its competition as well. The seller has experience in their niche. So it's a good idea to get the seller's insights. A prepared seller will have the business positioned within the industry and  metrics prepared with supporting documentation about competition in the market. The seller will use positioning in negotiations to support the valuation.

Do You Have Any Data About The Future Of The Niche?

Ohio business owners generally have information and forecasts about their current domain of operation. A seller should be open and excited even,  to share their data about future prospects of their company. It's a great question to help a buyer understand and plan how to approach moving forward business operations in the future.

Do We Need to Renew Any Permits Or Licenses?

All accurate information related to permits, licenses, leases on a property, or equipment is essential for the buyer to obtain from the seller. A competent seller has everything up to date and prepared for the buyer. It is wise for the buyer to seek out the information. The seller is responsible for transferring utilities, and required documents into the buyers name during the handover period before the sale is final. 

Will the Seller Share Staff Attrition Or Turnover Rates?

Buyers look for employee satisfaction and loyalty. If a business has high attrition, it could mean that employees are unhappy. If you find this happening, you need to ask your seller why and plan improvements to the workforce.

Does the Company Have Good Relationships With Customers?

Customer relationship is everything to a business, so it is a priority question to ask a seller. When you research online reviews and authority websites citing the company, be cautious of reviews that have been tampered with. Having reviews checked by a professional is a good idea.

Are You Using A Third-Party To Broker This Deal?

First Choice Business Brokers look after buying a business in Ohio. The process becomes straightforward, from the start, setting up meetings, preparing documentation, and paperwork negotiations, and a smooth transition. Hiring a business broker to oversee the sale takes the pressure off both parties, the buyer and seller. FCBB- Toledo has a well-established reputation for finding perfect matches! 

Do You Have A Financial Plan For Your Business?

Most owners begin with a business plan to get started. A business plan should align with goals and objectives and how you want to run the business.

You can ask the seller for their financial business plan during the sale. You can get a lot of insights, that could be a foundation for you to improve further with your business plan.

Can You Specify The Handover Period?

Following every business sale, there is a handover period. It gives sellers enough time to settle legal and official obligations before the sale of the business is final. A buyer and seller should establish how long the handover period will last during negotiation. The process usually takes from several weeks to 6 months.

We hope these key questions for a buyer to ask a seller provide a start to get  thinking, and inspire more questions. Being well prepared when you enter negotiations with the owner of a business is essential to protect your interests and set you up for a successful future.