Buying a Business? Be sure to Cover These Topics

If you are considering buying your first business, it is important to understand that you must ask the previous owner every question about running the business that you can think of. The more answers you can get, the less risk you will be taking on. Below are topics you should consider covering with the seller of the business:

What challenges does the business face? Knowing the obstacles you may face can help you create a strategy for dealing with them. If some of the obstacles are financially significant, it may impact how you negotiate the purchase price.
What advice can you give me? You might be surprised by what you can learn by asking this question. The seller may reveal information regarding missed opportunities, untapped markets or effective marketing efforts.
How have you documented the business’s financials? You will want to review the business’s tax records, profit and loss statements and other financial information. It is important that the seller can prove all income earned by the business in writing.
Are there any lawsuits pending against the business? You must confirm that there is no current or potential litigation that involves the business. The last thing you want is to take on liability, so have the seller execute a document verifying the business has no legal matters that may transfer to you.
Does the business depend on a specific client or vendor? A company that is reliant on one particular customer or vendor may appear successful, but you are also taking a big risk if that customer or vendor terminates its relationship with the business after the sale.
Will the employees continue working for the business? You need to know if the employees are aware of the sale and if they intend to continue working for you. This is especially important for the key employees. If certain primary employees intend to leave, be sure to ask if they have signed a non-compete and/or non-disclosure agreements.