So You Want to Buy a Business? Ask the Seller These 4 Questions First

Buying an existing business can often be a strong investment or savvy business move. Unfortunately, too many buyers do not do enough homework beforehand and end up in over their heads or with a dud of a business and buyer’s remorse. Doing your homework ahead of time and thoroughly researching your potential new company will not only help you make an educated decision, it will also help you run the business more effectively, should you go ahead with your purchase. If you’re thinking about purchasing a company or two, read on to find out the four questions you absolutely must ask before buying a company.

#1: Why is the Business for Sale?

We know it seems like an obvious question to ask but it is all too often overlooked. Just because you think you know the reason doesn’t mean you should neglect to ask. The business could be for sale for a number of innocuous reasons—maybe the owner is retiring or it is growing too big for him to run any more. Unfortunately, there are also a number of negative reasons it could be for sale, such as financial underperformance, new legislation that will harm the business, or even serious legal issues like a lawsuit. Always make sure to fact check the reasons a business owner is giving you. Remember, their main priority is selling their business, not benefiting you.

#2 What are the Long-term Prospects of the Business?

Perhaps the business you’re interested in buying is performing quite well at the moment and so you want to get in on the action. That makes sense, however, you should always make sure to do your research into the long term prospects of the company as well. If the business is taking advantage of a trend or fad then you may not be able to enjoy that business’ success for much longer.

#3 What Skills do I Need to Best Run this Business?

No one knows the business better than the owner, and so there is no one better to ask about what skills you’ll need to run the business effectively. This is one question that you can likely expect complete honesty from the seller and you should take advantage of the opportunity to find out if you have the necessary skills or if you’ll be able to learn them. It is fairly common for business buyers to realize too late that they don’t have the financial, social or managerial skills necessary to run the business they’ve bought – you don’t want to be one of these buyers.

#4 Does the Business Have Any Past or Ongoing Lawsuits?

Inheriting a lawsuit is never good—it is even worse though when you’ve essentially paid good money to inherit said lawsuit. Always remember to find out if the business, or the owner, has any past, present or pending lawsuits, and avoid any business that could potentially involve you in litigation. This is one of the most important questions to ask, and another one where you can expect honesty, as the owner could face even more legal trouble by lying about it. Just to be sure though, it is best to get the owner’s response in writing in case they are hiding anything.

Doing your research and being informed always pays off, and business is no exception. Buying a business on emotion can lead to buyer’s remorse…or worse. To avoid any future issues, ask the right questions to uncover the right information so you can make the right decision.

We know it’s not always easy to navigate through all the legal aspects of buying a business, so if you’re thinking about buying a business, don’t hesitate to call the skilled lawyers at APH Law today and let us guide you and advise you throughout the process.

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Written by APH Law PLLC

APH Law PLLC

When we founded APH Law PLLC in 2010, we did so out of a desire to connect business owners with more and better opportunities. No matter what industry you’re operating in, creating a strong foundation, preparing for the future, and protecting against challenges are key to long-term success. It is this kind of support that we take tremendous pride in helping businesses.