Questions to Ask a Seller Before Buying Their Business

Buying a business is never a decision to go through with lightly. It’s not just that there’s a lot of money on the line, there’s also a lot of time and your future at stake. While you’ll no doubt have a number of questions for the seller, make sure the below three are amongst them. Many buyers don’t and pay dearly for it.

When Did You Decide to Sell?

Ideally, you want to hear that the seller decided to sell after a long, thought-out process. If their business just came on the market, this would suggest they have had plenty of time to prepare the company and get all its affairs in order.

On the other hand, if they make it clear that they decided to sell very recently and then immediately put their company on the market, this might suggest something is not quite right. If nothing else, it seems unlikely they would have had enough time to properly prepare their business for sale.

What Can Be Done to Increase Profits?

As a buyer, you need to be thinking about how you can improve the business and bring in even more profits. If you just hope to maintain its current level of cash flow, your investment is going to take a long time before it becomes worth it and it may never if competitors overtake you.

By asking this question, you’re giving the seller an opportunity to tell you how the business can be improved without actually hurting its image. Sellers otherwise don’t tend to be upfront about this information because they’d rather talk about how their company is already so profitable.

Will You Sign a Non-Compete Clause?

One of the many benefits that come with buying a business instead of starting your own is that you already know there is a market for their product line or service. However, that benefit will go up in smoke if the seller just moves across the street and starts another business, taking those precious customers with them. The same is true if they take a job with one of your competitors.

A non-compete clause keeps this from happening. It will also root out any ulterior motives they may have for selling as quickly as possible. If a seller refuses to sign an NDA, you’d be best to proceed with caution, if at all.

Depending on the business, you should have a number of other questions to ask before buying. However, these three are essential to ensuring your purchase is the right decision.