Questions to ask when buying a business
It can always be helpful for buyers to consider things from the seller’s perspective. Some questions buyers should ask might include:
- Why is the current owner selling?
- How long has the business been established?
- How long has the current owner owned the business for?
- How long is remaining on the lease of the premises, and what are the options to renew the lease?
- Will the seller agree to sign a non-compete covenant?
- How many different customers does the business have per year?
- If only a small number of customers, are there contracts in place with the customers and if so, how long is remaining on the terms of the contracts?
- Are there any repeat customers, and if so what percentage of sales comes from them?
- Do a small number of customers make up a large percentage of sales?
- Are sales seasonal? That is – do some months have greater sales than others?
- What marketing activities do you undertake and what has worked the best?
- How many different suppliers does the business use?
- If the business is reliant on a low number of suppliers, are there contracts in place with these suppliers and how long is remaining on the terms of the contracts?
- What is the business owner paying himself/herself? Is this shown in the financial statements?
- How many hours per week does the current owner (and family members) work in the business?
- How has the asking price been calculated?
- Is the current owner willing to stay on for a period of time to provide training?
- Is there a business plan?
- Are there any contracts in place with staff?
- Are staff remuneration packages documented?
- How long has each staff member worked for the business?
- Has annual leave & long service leave been accrued? If so, will it reduce the final purchase price?
- Is there an additional cost for stock? If so, how much?
- Is there any old or obsolete stock on hand?
- If the business is a company, are you buying the shares in the company or the assets of the company? You should see a solicitor about this.
Please note this list of questions is provided as a guide only and should not be considered as a complete or absolute list due to the wide variety of business types and structures.
An independent business valuation compiled by a professional can help. Contact BIZVAL or order your business valuation today.