The following serves as an excellent checklist for a Buyer in compiling questions to ask the Seller about his business during the Due Diligence period.

Potential Problem Areas to be Addressed

  • Changes in law, New competition, Change in technology
  • Foreign imports, Drop in demand, Equipment obsolescence
  • Facility obsolescence, Market shifts, Down trends
  • Employee theft, Interest rate flux, Labor problems
  • Tax liens, Increased repair costs, Low margins
  • Capital improvements needed, Single supplier position, Single customer position
  • Bad receivables, Low backlog, Shipping problems
  • Political instability, Restricted credit, Lavish facilities
  • Closed business, Customer problems, Supplier problems
  • Regulatory violations, Utility rate changes, Insurance cost changes
  • Obsolete inventory, Slow moving inventory, Obsolete advertising
  • Key talent leaving, Lease about to expire, Employee promised equity
  • High lease escalation, Product liability claims, Patent expiration
  • Sales agreement expires, Cash flow problems

Specific Questions For The Seller

  1. How did you get started in this business? What first attracted you to this product (or service)?
  2. Why do you now want to sell the business? Have you been thinking about selling for a long time?
  3. What are your plans after you sell the business?
  4. When would you like to have the business sold?
  5. What kind of ownership-transition period do you foresee?
  6. What were your plans for the business before you decided to sell?
  7. What would be the greatest obstacles to face in achieving those plans?
  8. What have been the most significant factors in the past success of the business?
  9. If I, as the new owner, wanted to invest additional working capital into the business, what would I want to use it for?