If you are buying a business, you will have many questions – for yourself, for your business broker and finally for the business seller themselves.

Many business buyers go into the first meeting with the current business owner with a fairly lengthy and standard set of questions. Big lists like these might get you some of the information you need, but they typically cause more harm than good because no seller wants to be endlessly grilled with questions that could easily be answered by looking at the numbers or by reading the current lease. If you irritate a seller on day one, it will make the journey to a closing table that much harder.

Instead, you should go into that first meeting having done your homework. Go over the information you’ve been provided, do a little research on your own and come up with a few really good questions. Think quality over quantity. Many good questions can even serve multiple purposes. Here’s one:

If You Weren’t Selling, How Would You Grow The Business?

This is one of the best questions a business buyer can ask if they want insight into how their new business might be able to grow as well as key them in on any potential problems that have been ignored. Why? No one knows the guts of a business better than the current owner – and growth should be at the top of the priority list for any business.

If you want to make this question even more powerful, add a caveat. The caveat “if you had unlimited funds, time and resources” added to the question of business growth can reveal a wish list of possibly great ideas that the current owner, for whatever reason, wasn’t able to make happen. Here’s an example:

If you are looking at buying a successful, but small, ice cream shop – the current owner might tell you that they would have loved to open another location in a busy downtown area nearby, but they were never able to come up with the funds for a second location build-out because they spent the majority of their profits on a personal medical issue. This lets you know that there might be an immediate opportunity to grow the business once you take over. It also lets you know that the current owners had their eye on growth – they just couldn’t make it happen.

Answers to this question can also reveal potential problems brought about by owner neglect. If the current owner was capable of making a change to grow the business, why didn’t they? And what other aspects of the business have been left to slide?

If we revisit the ice cream shop scenario – say the current owner of a different ice cream shop says they probably could have done more marketing but they didn’t have time. Further investigation in to why there was no time for marketing reveals the owner spends very little time at their business and essentially leaves it (and the employees) to run on it’s own.

The point here is an owner who cares about the growth of their business has probably done a better job of running their business than someone who lets things slide. Asking this question will give you a good deal of insight into the health of the business you are considering. Do your homework – ask good questions.

Are you thinking about buying a business and are curious about how you can grow your new purchase right out of the gate? Would you like to now what other types of questions would be good to ask? Please leave any questions or comments and we would be happy to help.

Want to read about additional good questions? Click here:

Ask Good Questions: A Business Buyer Must – What Does The Seller Want Out Of The Deal?

Ask Good Questions: A Business Buyer Must – How’d You Come Up With That Price?

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

https://infinitybusinessbrokers.com

No Comments »

If you are buying a business, you will have many questions – for yourself, for your business broker and finally for the business seller themselves.

Many business buyers go into the first meeting with the current business owner with a fairly lengthy and standard set of questions. Big lists like these might get you some of the information you need, but they typically cause more harm than good because no seller wants to be endlessly grilled with questions that could easily be answered by looking at the numbers or by reading the current lease. If you irritate a seller on day one, it will make the journey to a closing table that much harder.

Instead, you should go into that first meeting having done your homework. Go over the information you’ve been provided, do a little research on your own and come up with a few really good questions. Think quality over quantity. Many good questions can even serve multiple purposes. Here’s one:

How’d you come up with that price?

As long as a listing price isn’t crazy, most buyers don’t tend to care how a seller came up with their price because a buyer will do their own valuation of the business during the due diligence period. While it is true that you as a buyer will be judging the value of the business on your own, you should consider why the current owner priced the business the way they did.

Why? The method used to come up with a listing price can vary. Sometimes multiples of earnings are used, sometimes the value of the business is based more on the assets – but there are many others as well. A typical seller will have an idea in their head of what they think they would like to get out of the sale of their business, then that number is tweaked to match the current cash flow of the business, the assets and inventory, the current market, etc.

While most valuation methods are pretty straight forward, like multiples of earnings, the method a seller used can tell you a lot about what parts of the business they find important and can help you understand where the sticking points of negotiations might be. For example, did they put a lot of value on the assets? Be prepared to give a little if you disagree with the seller on what those assets are worth.

The point here is although the question “What’s it listed for?” is important, the “Why?” is important too. It will tell you what parts of a business an owner focused on and it will better prepare you to sit down at a negotiation table.

Are you searching for a business to buy and are wondering how a seller came up with a price? Do you have more questions about the negotiation process? Ask us! Please feel free to leave comments or questions here and we would be happy to help.

Want to read about additional good questions? Click here:

Ask Good Questions: A Business Buyer Must – What Does The Seller Want Out Of The Deal?

Ask Good Questions: A Business Buyer Must – If You Weren’t Selling, How Would You Grow The Business?

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

https://infinitybusinessbrokers.com

No Comments »

If you are buying a business, you will have many questions – for yourself, for your business broker and finally for the business seller themselves.

Many business buyers go into the first meeting with the current business owner with a fairly lengthy and standard set of questions. Big lists like these might get you some of the information you need, but they typically cause more harm than good because no seller wants to be endlessly grilled with questions that could easily be answered by looking at the numbers or by reading the current lease. If you irritate a seller on day one, it will make the journey to a closing table that much harder.

Instead, you should go into that first meeting having done your homework. Go over the information you’ve been provided, do a little research on your own and come up with a few really good questions. Think quality over quantity. Many good questions can even serve multiple purposes. Here’s one:

What does the seller want out of the deal?

The answer to this question will not only tell you the base from which negotiations will begin, it can tell you volumes about how an owner really feels about their business and it’s future.

A committed owner who cares about the future of their business will not only want a check from a buyer. They will also be concerned that their business continues to thrive and continues to be a good place to work for their employees. Owners that care about the legacy of their business have likely been very attentive to the business and it’s growth. They will be more willing to keep skin in the game by offering seller financing and will probably stay on for a time and train a new owner too.

If the answer to this question is “as much money as possible as soon as possible”, then you need to take a good, hard look at the business. Determine why the owner is trying to abandon ship. Is the business a house of cards with well-concealed debts? Did a big competitor just move in down the street and they’re hoping you don’t figure that out until after they hand you the keys?

The point here is an owner who cares about more than just the financial value of their business has probably done a better job of running their business than someone on a mission to get out. Asking this question will give you a good deal of insight into the health of the business you are considering. Do your homework – ask good questions.

Are you thinking about buying a business and want to know more about how to come up with good questions? Do you want to know what to look out for in those first conversations so you don’t end up with a problem business? Ask us! Please feel free to leave questions or comments and we would be happy to help.

Want to read about additional good questions? Click here:

Ask Good Questions: A Business Buyer Must – How’d You Come Up With That Price?

Ask Good Questions: A Business Buyer Must – If You Weren’t Selling, How Would You Grow The Business?

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

https://infinitybusinessbrokers.com

No Comments »