To become an entrepreneur, you don’t necessarily need to start a business from the scratch. Some people prefer to purchase an already existing and well known business, then continue from where the founder stopped. Buying a business is a great idea however it is a big decision that can be taken only after considering a lot of factors and asking the right questions; this is to avoid encountering problems in future. In this article, you are going to see the questions you need to ask before buying a business. Listed below are the questions-
- The first and foremost question you need to ask is why the owner wants to sell the business. Ask the seller why the business is for sale before considering buying it.
- Ask the seller which part of the business is for sale. Is it the entire company? A section? An asset? Understand what they are really offering for sale.
- Ask about the company’s history; how it started and grew to the present state. How old is the company? If the seller is not the actual founder of the company, ask how long him or her have been running the business.
- Ask for legal documents that proves that the company is certified and approved by the appropriate agencies that heads it.
- Ask about the rules and regulations that governs the location of the company.
- Ask if the company owes any form of debt, or if any organization or body is owing the company.
- Ask the seller what is the company’s reputation. Is it recognized or popular in the market?
- Ask if the company has an already existing lawsuit or is it likely to face one in future because of past actions. You would really want to know this to avoid having to face the problem of dealing with a lawsuit in future.
- Ask if the company is doing well in terms of sales and profits. You can request for the company’s financial statement and look it up. Find out the financial performance of the company from at least 3 years ago till date. Check the gross profits, expenses incurred, and then the annual net profits.
- Ask the seller what is the target market for the business. Are your prospective audience adults? Men? Women? Children? What type of audience would you have to deal with.
- Ask about the company’s key suppliers (if any) and the key customers.
- Ask the seller what are his or her plans for the employees and if they are aware that the company is up for sale?
- Ask if the employees are willing (and should be willing) to sign a non-disclosure agreement, so they won’t share vital information about the company to their competitors. Violation of the non-disclosure agreement would lead to them being sued to court.
- Ask about the company’s competitors and what are the advantages or disadvantages the company has when compared to its competitors.
- Ask the seller what he or she would have done differently if the business was not on sale.
- Ask about the company’s asset’s and liabilities.
- Ask if the seller is willing to sign a legal document that would prevent him or her from setting up an impersonating company and try to compete with this present one for sale.
- Ask the seller what you need to know about the business including skills, qualities, and lots more, in order to run the business effectively and successfully.
- Ask if you would you need a license to operate the business, and if it needs continued renewal?
- Ask what payment methods have been used previously in the company.
- Ask if the company normally gives warranty for their products, and how many months warranty do they give.
- Ask about the amount of tax the company pays.
- Ask if the company signed any existing contracts, and if that would be transferred to the new owner.
- Ask the seller what challenges the company is facing at this time.
- Ask about the major employees in the company that are effective and reliable, and if they would want to remain in the company after it has been sold.
- Ask what is the current salaries or wages of the employees.
- Ask what sales and marketing techniques the company operates on, and if it has been effective for them and brought in expected results.
- Ask the seller if there are seasonal changes in the business. If there is a season when demand for the company’s products are high and if there is a season that the demands are low.
- Ask if the company’s revenue is on the rise or if it’s decreasing, then find out what you can do to resuscitate it if it’sdeclining.
In addition to asking the seller some questions before buying a business, you can also ask yourself some questions to determine if you should really go ahead to buy the business. They includes-
- Why do you want to buy this particular business? What attracts you to the business?
- Do you feel the business is worth the sellers asking price?
- Would you be able to cope with the market competition if it is too high?
- What would happen to the current employees of the company? Are you going to lay them off to start with new set of workers or would you retain them?
- Would you want to run the business personally as a sole proprietor, or would you prefer to enter into a partnership and be a co-owner of the business?
- Are you qualified to run the business? Do you have the necessary skills and knowledge required? If you don’t possess them yet, is it something you can learn and you feel you can cope with?
- Would you want to buy the entire business or a portion of it?
- Would you be able to cope with the rules and regulations of the company’s location?
- Do you have an idea of how to improve the company’s financial status if it is declining?
By asking yourself these questions, you would be able to determine if you would be able to cope with buying that business and if it would profit you.
I hope this article has been helpful! Thanks for reading!
