The beginning of the year/ first quarter is a great time to purchase a business. Buying a business gives you an easier way to get into entrepreneurship and make more money for yourself. Before getting excited there is a lot of due diligence you need to perform and most importantly you need to ask questions.
The questions you ask need to give you insights into the business you want to purchase. The questions need to centre around finances, operations, staff, customer base, product line or services and growth plans for the business.
The information you get from asking these questions will help you see if the business aligns with your future plans and your financial capabilities.
In this article, we give you some benefits of buying a business and the questions you need to ask when purchasing.
Benefits of Buying a Business
Here are some of the advantages of buying an existing business.
Business Has a Proven Concept
An existing successful business means the concept works. Ensure the company you want to buy has consistent revenue and profitability. A business that presents with these two factors has a strong customer base and is profitable which is what you want.
Has Existing Employees
Buying an existing business means you won’t have to worry about finding and training new staff. The current employees are well-trained and can provide you with key information on how the business works, making for a more seamless transition.
Established Customer Base
Purchasing a business also saves you the hassle of finding customers. The loyal customer base of the company will want to see the business continue to be successful, which is an advantage for you because that means they will stay.
Has Equipment, Raw Materials and Products
Typically in business transactions, real estate and furniture and equipment are included. By purchasing an existing business you can save a lot of money on things like equipment and raw materials.
Gives You Entrepreneurial Freedom
Buying a business can give you the solid foundation you need to implement your creative ideas. When researching the business ensure that its model is flexible and can fit in with your ideas. This sort of freedom is also found when starting your own business, however, there is less risk with an established business.
Questions to Ask When Buying a Business
Now that you know all the lovely things that come with buying a business, the real work can start. The below questions are going to serve as a guideline for the questions you need to be asking during the purchase process.
1. Why is the Business Being Sold?
Asking this question will give you insights into the current state of the business and why the owner wants to sell it. Understanding the motivation behind the sale is crucial in determining if the business aligns with your goals and values.
If the business is being sold for negative reasons like financial struggles, failing business model or regulatory or legal problem, you need to do due diligence and determine if it’s still the right fit for you.
2. How Was the Asking Price Determined?
The asking price of the business will tell you a lot about its value and potential for growth. You need to ask the owner how they determined the asking price and who conducted the business valuation.
Additionally, you can do your own research by looking at how much similar businesses are priced. This will give you a better understanding of the business’s market value and help you negotiate a better and fair price.
3. What are the Key Assets? And are They on a Hire Purchase Agreement?
Assets in the business are anything that the business owns. This includes equipment, inventory, intellectual property and real estate. You need to ask about these assets and understand their status to give you a better picture of the company’s financial status.
Also, if any assets are under hire purchase, you need to know so you can look at your financial capabilities.
4. What are the Main Revenue Streams and Profit Margins?
Understanding the main source of the business is crucial to evaluating its potential for growth. You need to ask the owner about the business’ profit margins and how income is generated. A comprehensive evaluation and understanding of these aspects will help you measure the business’ potential for success and find areas for improvement.
5. What is the Current Customer Base and What Makes them Loyal?
You need to find out what the customer base looks like and what makes them stay loyal to the business and the brand. Ask the current owner about their target audience and all demographic information they have.
Additionally, you need to find out what sets the business apart from its competition. This will provide you with more insights into why customers keep coming back.
6. Does the Business Have any Legal or Compliance Issues?
Every industry has its own set of laws and regulations you need to follow. It’s extremely important that you not only understand the regulatory landscape of the industry the business is in, but you also need to know how the business is complying with them.
Compliance is very important and if your potential new business is not compliant you need to understand the risks before buying.
7. Does the Business Have an Online Presence?
It’s 2025 and everything is tech-enabled which means so are businesses. A good business to buy is one that has a decent online presence such as social media pages, websites and other online sources.
If the business you are buying is not online, you will need to drive it towards a more digital approach. This can be time-consuming and expensive so make sure you can afford to put in the time and money.
8. What is the Owner’s Exit Strategy?
You need to ask the current owner about their exit strategy. This is vital because their exit strategy can impact your purchase decision. Some owners may be looking to retire or move on to other ventures while others want to stay on in some capacity.
Understanding the current owner’s intentions will help you develop a better purchasing strategy and let you know if the owner will be available for a smoother transition.
9. Who are the Key Employees?
You need to know who will be working with you once you buy the business. Ask the current owner about any key personnel who play a crucial role in the daily operations of the business. Finding out about their roles, responsibilities and time at the company will help you see who you want to keep and where new staff is needed.
Using these questions you can get a really good image of the business you are trying to buy. If the business ticks all the boxes you want it to, you can go ahead with your purchase. If you have any hesitations, then you need to rethink the purchase or find another business to buy.
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