Buying a business requires due diligence and research. Many buyers focus solely on historical financial data, expected cash flow and return on investment. It is good to know why they are selling. Exploratory questions can give further insight to the business as an owner.

Be prepared to directly ask the owner some of the following questions:

  1. 1. What are a couple of things you would do differently, if you could start the business over? This gives particular insight to their business. Explain a costly mistake that should have been avoided? What regrets do you have? How did the business impact their family time and lifestyle?
  2. 2. How did you arrive at your asking price? Business values should be based on financial data and market conditions. Good to understand if there are arbitrary personal reasons, that are not defensible. Some owners increase the asking price based on short-term growth opportunities they have not yet capitalized on. If an owner has not taken that risk on, why should the buyer.
  3. 3. What are the employees planning on doing after you leave? The owner can be integral in how the business operates with specific personalities of the employees. A buyer needs to step in and fill those shoes. What are the personality traits of some of these employees and how do you recommend interaction with them? If some employees are planning on leaving, are their non-disclosure agreements in place?
  4. 4. If you weren’t selling, how would you grow the business? Get their insight. Look for areas of interest or neglect.

Open ended questions give a chance for you to directly interact with the owners and get insight for yourself. Are you thinking about buying a business and are curious about how you can grow your new purchase right out of the gate? Please leave any questions or comments and we would be happy to help.

John LaMay is an Advisor with Sunbelt Business Brokers. He can be reached at (408) 436-1900, x105, or at [email protected]