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?
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