Buying a business might seem like a monumental task – there’s paperwork, red tape, negotiations, money – but there are better ways to go about successfully completing a transaction than others.
One of the best ways you can be a more efficient business buyer? Ask questions.
Of course I’m going to ask questions! What do you mean?
The process to buy a business starts with looking at general listings and pairing down the list of possible businesses provided by your broker to just a few. For those few businesses, you will be asked to sign a nondisclosure agreement for confidentiality purposes – and then you will be forwarded a marketing package that typically includes information about the business, the physical location, a financial overview, pictures, etc.
At this point many new buyers ask for a meeting with the seller or for a tour of the location, but if all you’ve done is glance at the marketing package – then a meeting or tour will probably end up a total waste of your time. When you are buying a business, you are buying cash flow – so the seller’s personality or the location decor really aren’t that important.
The only way to figure out if a business is really right for you is to dig deeper than just a cursory glance, and you need to do that deep digging right from the start so you can eliminate businesses that aren’t right for your goals – sooner rather than later. The more efficient path? Take a really close look at the information you’ve been provided and come up with a list of questions you’d like answered.
What kinds of questions should I be asking?
Every business is different, so your questions from one business may or may not be the ones you have for another. Here are some general questions to get you started:
What are the seller’s daily duties? What would a typical work day look like for me as the new owner?
How is the income derived? Is it owner-to-prove? What do the tax returns and P&L statements show as far as how much the business makes?
What types of licenses are required for this business? Would I qualify for those licenses?
The moral of the story is any question is a good question, for a couple of reasons. First and foremost it will help you weed out businesses that won’t fit with your goals and expectations. Second, your questions will help your business broker understand what is important to you so they can better refine the search for potential businesses.
Save yourself a ton of time and energy by carefully reviewing information and asking lots of great questions – before you sit down with sellers and go for a back-of-the-house tour.
Are you a new buyer who has additional questions about the process to find the right business? Would you like more pointers on the best types of questions to ask? Ask us! Leave comments or questions here and we will be happy to help.
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