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