Basic interview skills are a bit of a no-brainer, especially if you aren’t new to the world of the working. Whether you’re applying for a new job at a new company or being interviewed for a promotion within your current place of employment – you know that you need to do some leg work and prepare before you are sitting across from an interviewer. You will need to know some basic information about the job you are applying for, have pre-prepared answers to common interview questions and have some creative questions of your own to ask the interviewer themselves to stand out from the crowd. You get the drill.
What is totally shocking about buyers in the small business market is they rarely, if ever, do the same kind of preparation for meetings with sellers.
Why is this shocking? When you buy yourself a business, you are essentially buying yourself a job, so coming up with questions and getting those questions answered before you ultimately make a purchase decision seems like the sensible thing to do.
True, you are not typically trying to impress a seller so they will hire you – but initial meetings and conference calls with sellers allows you the opportunity to vet a business long before you write a very big check, so why wouldn’t you come prepared?
What should you be asking? The questions you ask will depend on the type of business you are looking to buy, but there are a few general questions you should always ask.
When you buy a business you are essentially buying cash flow, so questions about how the business makes money will be very important.
How is income derived?
How much did the owner take home last year?
What were the gross and net profits of the business?
How much of the profit was reinvested in the business?
Other questions, equally important as the questions about financial matters, deal with the fact that entrepreneurship isn’t just a job, it’s a way of life. You will have no idea what lifestyle you will be inheriting from the current owner unless you ask, and the answers to these questions that are undefined by black and white numbers will also help reveal any red flags.
For instance, if the question “what aspect of the business keeps you up at a night?” gets an answer of “absolutely nothing” – you know you are being lied to. All small business ownership comes with a fair amount of stress because the buck stops with you.
In addition to more traditional financial questions, try asking questions like these about your future life.
What does a typical work day look like for the owner?
What about a work week?
How often do you take vacations?
How long are you comfortable leaving the business in the hands of the staff – hours, days, never?
How many hours do you work on a typical day?
Do you work weekends, holidays?
If you had all the time and money in the world, what would you do with that time and money to grow or change the business?
What has prevented you from making those desired changes a reality?
The message here is to treat all of those years of interview preparations as a primer for your conversations with business sellers. Asking questions during those crucial first conversations can save you a lot of wasted time and energy by weeding out the businesses that aren’t going to fit with your goals for business ownership.
Don’t waste the opportunity – ask questions!
Are you looking for a business to buy and want to know more about the types of questions you should be asking? Do you have questions about what other answers you should consider as red flags? Ask us! Leave any comments or questions here, and we will be happy to help.
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