Place A Business For Sale Posting 
Place A Business Wanted To Buy Posting
Share This Info:
The Top 10 Questions You Should Ask Before Buying A Business
The Top 10 Questions You Should Ask Before Buying A Business
Buying a small to mid-sized California business can be a complicated process. Once you go through the actual sales process, you actually have to run the business you just bought! While being an Entrepreneur has its perks, it can also be challenging so before you decide to buy a business, you need to make sure you are ready for the challenge and that you have a thorough understanding of the company you plan to own.
I have been a part of many deals throughout my time in this industry and I can't tell you how often business buyers miss information about the company they plan to buy because they aren't prepared with a list of questions to ask. Each transaction is different so ask additional questions specific to your own situation but here is a list of 10 questions to get you started.
Ask yourself these questions before starting the process of buying a business. Once you find a business you are interested in, I've given you another set of questions to keep in mind as you do your due diligence.
Personal Questions to Ask Yourself before Buying a Business:
Is it the right time?
While being an Entrepreneur may be something you've always wanted to pursue, before you buy a business you need to be honest with yourself. Evaluate your current circumstances and decide if it is the right time for you to take this leap. As I said, the process can be challenging and demanding so keep your personal commitments in mind as you think this through.
Do I have the support of my spouse or significant other?
When you become a small business owner your schedule and your finances may change. Make sure your significant other understands this and they are willing to support you if things don't go as planned.
How much working capital do I have access to?
Having access to working capital is important to ensure you can keep the business running if you should incur unexpected expenses or changes in revenue. I've seen people buy and run small businesses successfully without much working capital but it's always good to have a safety net and to be honest with yourself about the risks you're taking.
What do I want the business to do for me?
I suggest you decide early on what you want out of the business you plan to buy. Some people buy businesses as a career move and plan to work at them daily. Others buy businesses for a stream of residual income. Decide what you want up front so you can look for a business that can accommodate you.
Questions to Ask About the Business:
Why is the owner selling?
Asking why the owner is selling is important for a number of reasons. For one, it may help you uncover problems with the company if the owner is selling because of declining sales or other problems. It is also important because if the owner is in a hurry to get out you can use that information in your favor during price negotiations.
How did the owner arrive at the asking price?
Ask the owner what methods they've used to arrive at the asking price. This can help you evaluate whether the business is fairly priced.
How much is the owner taking in salary?
Many people don't think to ask this and it is very important. If the owner is taking a salary of $50,000 and you're accustom to living off of $100,000 per year you need to decide if you are willing to make the adjustment to your income or if the business can afford to pay you more.
What can I do to grow or improve the business?
Even if the company you want to buy is doing well, it can always do better. Before you buy a business that is for sale you need to have an honest conversation with yourself as what skills and experience you can bring to the table that would grow or improve the business after you own it.
Is the seller willing to sign a non-compete?
Regardless of what the circumstances are for the sale, I suggest you get the owner to sign a non-compete if appropriate. You don't want the owner to sell you his or her business only to open up shop down the street as your competitor.
What is my exit strategy?
Your exit strategy is probably the last thing you're thinking about at this point but I encourage you to consider it early on. If you think about your exit strategy you can buy and grow a small business that will provide you with the opportunities you want today and in the future when you are ready for your next venture.
About The Author: Peter Siegel, MBA is the Founder & Director (ProBuy & ProSell Programs) at BizBen.com. He is also a Business Purchase Financing Expert and Advisor. He works with potential business buyers, business sellers, brokers, agents, investors, & advisors. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a puchase of) small to mid-sized businesses.
Categories: BizBen Blog Contributor, Buying A Business, Deal And Escrow Issues, Due Diligence Issues, How To Buy A Business
Comments Regarding This Blog Post
Another commonly asked question is, "How long have they owned the business?" "Why are they selling?" is a question many buyers ask if the business was highly profitable, because, why would they want to sell something that was a cash cow? How long the owner has been in that current location can give a buyer some important information, especially if the seller has only been there under a year or so, which could be a warning sign. We as business brokers all know the same business that sells over and over every 2 years or so, because ultimately each owner can't make anything of it even with concept changes.
Great post, Peter.
I had the good fortune to grow the company I started directly out of law school over nine years to 200 employees and #25 on the Inc. 500 before we sold it. That experience gave me a very clear idea what I wanted (and didn't want) when I decided to acquire another business.
The questions I asked myself before I bought my next business are ones that any buyer can ask:
1. Is this a business I'll be proud of? Having pride in ownership is hard to put a value on but nearly every successful business owner I know is proud to be doing what they are doing. Don't make the mistake of buying a business you wouldn't be proud of purely on seller discretionary income, thinking that you'll grow to love it. You won't.
2. Is the industry a good fit for my strengths? I recently helped a client who was looking for a business in an area he knew very little about. While he's a bright guy, there was virtually no match between what he was already good at and what the business required.Buying a business is enough of a challenge already. You're not likely to know everything about the industry you buy into, but don't make your odds worse by getting into a space where you'll not only be learning how to be a business owner, but also learning the industry from scratch.
3. Am I comfortable with the Seller? Part of my job as a business attorney is to draft agreements that protect my clients if things go wrong. But even the strongest contracts can't prevent someone from suing you or guarantee a win if you have to take legal action.
If you are working with a Seller who is already making you feel uncomfortable for any reason before the close, there's a good chance you're going to continue to experience problems with that Seller after the close. As someone who has been on both the buy and sell side personally with my own businesses, I've experienced how we tend to put blinders on when we find a deal we think is the "right" one. It's important to take the blinders off and evaluate the deal and the seller parties realistically. Trust your instinct and don't be afraid to walk away from a deal where the seller is being non-responsive, evasive or putting pressure on you to sign before you're ready.
I had the good fortune to grow the company I started directly out of law school over nine years to 200 employees and #25 on the Inc. 500 before we sold it. That experience gave me a very clear idea what I wanted (and didn't want) when I decided to acquire another business.
The questions I asked myself before I bought my next business are ones that any buyer can ask:
1. Is this a business I'll be proud of? Having pride in ownership is hard to put a value on but nearly every successful business owner I know is proud to be doing what they are doing. Don't make the mistake of buying a business you wouldn't be proud of purely on seller discretionary income, thinking that you'll grow to love it. You won't.
2. Is the industry a good fit for my strengths? I recently helped a client who was looking for a business in an area he knew very little about. While he's a bright guy, there was virtually no match between what he was already good at and what the business required.Buying a business is enough of a challenge already. You're not likely to know everything about the industry you buy into, but don't make your odds worse by getting into a space where you'll not only be learning how to be a business owner, but also learning the industry from scratch.
3. Am I comfortable with the Seller? Part of my job as a business attorney is to draft agreements that protect my clients if things go wrong. But even the strongest contracts can't prevent someone from suing you or guarantee a win if you have to take legal action.
If you are working with a Seller who is already making you feel uncomfortable for any reason before the close, there's a good chance you're going to continue to experience problems with that Seller after the close. As someone who has been on both the buy and sell side personally with my own businesses, I've experienced how we tend to put blinders on when we find a deal we think is the "right" one. It's important to take the blinders off and evaluate the deal and the seller parties realistically. Trust your instinct and don't be afraid to walk away from a deal where the seller is being non-responsive, evasive or putting pressure on you to sign before you're ready.
Contributor: Business Broker: LA County Area
Terrific thoughts here, thank you Peter. The one question I see buyers often overlook is the subject of working capital. New business owners get so focused on raising funds in order to look attractive to sellers, and doubly focused on crossing the finish line in the deal, they often under-estimate their capital requirements. We closed escrow recently on a retail deal where the buyer didn't believe much added cash would be needed after closing. But in the first 6 months, a lengthy illness forced the owner to hire added help and a key employee got pregnant, adding to her payroll woes. She's still trying to recover. Make sure you either have adequate cash on hand, or access to adequate cash in a pinch.
Contributor: Timothy Cunha JD: Business Broker, SF Bay Area
Ironically, the Exit Strategy is one of the more important considerations when purchasing a business. It ranks right near the top of the list along with "What can I do to grow or improve the business?" That's why as a Certified Value Builder, I offer business owners preparing to sell their business and new owners who have just bought a business my consulting services utilizing The Value Builder System. Through a structured systematic monthly approach, all aspects of the business are evaluated and specific tactics are implemented and monitored for a strategic approach to growing the value of a business. The focus is on both current profit and long-term value enhancement when the business is ultimately sold.
When I started my computer technology company a few decades ago, my goal was for a merger, acquisition, or IPO within five years--that was the goal we always kept in focus. Almost five years to the day, I consummated a very lucrative merger of my company into the industry leader at the time. Managing the company with the "endgame" in sight and the building of maximum value as the goal results in a much more efficient, effective, and successful enterprise, both in the short-term and the long-term.
When I started my computer technology company a few decades ago, my goal was for a merger, acquisition, or IPO within five years--that was the goal we always kept in focus. Almost five years to the day, I consummated a very lucrative merger of my company into the industry leader at the time. Managing the company with the "endgame" in sight and the building of maximum value as the goal results in a much more efficient, effective, and successful enterprise, both in the short-term and the long-term.
Contributor: Business Broker, Northern California
Buying a business or practice is indeed like taking a personality test. A personality test reveals people's strengths and weaknesses including how they respond to different situations. Most business sellers only sell one or two businesses in their life time while most business buyers also only do this once or twice in their lifetime.
I was recently working with a business buyer who had been looking to buy a business for 18 months. He said he was so pleased to work with me as I took the time to break things down and explain them to him. However, when it came to him making a reasonable offer with a reasonable set of terms for the deal he wanted everything in his favor. Needless to say after 4 months of working with the buyer the deal fell through as the seller wasn't comfortable with all the buyer requirements.
It sounds a little unusual but a good deal is normally when the seller thinks the buyer is getting it all their way while the buyer thinks the seller is getting it all their way or as I like to observe, a good deal is when neither the buyer or seller are happy which means the deal is probably fair to both parties.
I was recently working with a business buyer who had been looking to buy a business for 18 months. He said he was so pleased to work with me as I took the time to break things down and explain them to him. However, when it came to him making a reasonable offer with a reasonable set of terms for the deal he wanted everything in his favor. Needless to say after 4 months of working with the buyer the deal fell through as the seller wasn't comfortable with all the buyer requirements.
It sounds a little unusual but a good deal is normally when the seller thinks the buyer is getting it all their way while the buyer thinks the seller is getting it all their way or as I like to observe, a good deal is when neither the buyer or seller are happy which means the deal is probably fair to both parties.
| Helpful Resources To Assist In Selling And Buying California Businesses |
 |
Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393. |
 |
Brad Steinberg, Broker - Laundromat Specialists PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department. |
 |
Hasan Abdullah, Esq. E-2, Immigration Legal Assistance I have over 10 years experience with E-2's and immigration issues. E-2's approved for as little as $10,000. Let me assist you with E-2 visa strategies when buying and selling a small to mid-sized California business. Mention BizBen.com for a FREE consultation when phoning me direct at 510-500-1155. |
 |
Elizabeth McGovern: Escrow Services - SF Bay Area McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645. |
 |
Diane Boudreau-Tschetter: Escrow And Bulk Sale Services California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100. |
 |
Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063. |
 |
Helen Yoo: Escrow & Bulk Sale Services - Southern California New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151. |
 |
Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741. |
| Related Articles, Events, Blog Posts, Discussions, Videos, Interviews |
 |
What Is The Typical Business Broker Fee For Sellers And Buyers? Who Pays It?
Was just asked the question from a business owner what the "typical commission" amount is for a broker or agent and if upfront fees are common? Thought this might be a great Discussion topic on BizBen for both business owner/sellers and potentially for business buyers (buyer representation). |
 |
How To Determine Whether The Buyer For Your Business For Sale Is Sincere
A problem owners encounter when offering a CA business for sale is that not all so-called business buyers are qualified to make the purchase. It's frustrating and costly to waste time showing non-qualified buyers the business. Here are ways to identify time wasters so the focus is on real buyers. |
 |
Uncover Hidden Problems In Due Diligence When You Buy A Small Business
Most everyone who's decided to buy a small business in California knows the importance of due diligence. That involves close examination of a business prior to removing contingencies. But not everyone knows how to uncover problems that are not obvious. Here are five of the most common hidden issues. |
 |
Why Isn't My Business Selling? 6 Great Questions To Ask Yourself For Answers
It can take months, sometimes longer to sell a small business. Here are 6 questions from Peter Siegel, MBA (Business Purchase Financing Expert, ProSell Program Advisor with BizBen) at 866-270-6278 to ask yourself to help you determine why your small to mid-sized California business isn't selling. |
 |
Financing A Business Purchase With Limited Or No Real Estate Collateral
In my experience working with the "right banks and financial institutions" repayment ability sometimes overrules collateral pledged by someone needing financing for a business purchase or a down payment. Peter Siegel, MBA (Business Purchase Financing Expert) at 866-270-6278 shares his experience. |
 |
How Do I Navigate Through The Negotiation Process When Buying A Business?
Negotiating the terms of a business deal is a delicate process, where one wrong move can cost you the business that you wanted to purchase. Peter Siegel, MBA (BizBen ProBuy Program) discusses the ins and outs of negotiations, and how to work well with the seller to get a deal done. |
 |
How Many Months Should I List My Business With A Business Broker?
It's important to remember that selling a business takes time. Unlike selling a house, which can be sold relatively fast, a business can take up to six months to a year to sell. Joe Ranieri (Orange County Business Broker) at 714-292-5448 explores this topic from a Business Brokers perspective. |
 |
Absentee Run Small Businesses - Is That Really A Possibility For Buyers?
Is buying a absentee run small business really a possibility? Peter Siegel (BizBen ProBuy Director) gets asked this question a lot in his consulting sessions with business buyers. Read more about what other Advisors and Intermediaries feel about this topic on this popular BizBen Discussion! |
| See All News, Tips And Events |
Categories:
BizBen Blog Contributor
BizBen News
Business Broker Information
Business For Sale Statistics
Business Purchase Financing
Business Valuation Issues
Buying A Business
California Educational Events
Deal And Escrow Issues
Due Diligence Issues
Franchises For Sale
General Info
How To Buy A Business
How To Sell A Business
Legal Topics
Selling A Business
Small Business Financing
BizBen News
Business Broker Information
Business For Sale Statistics
Business Purchase Financing
Business Valuation Issues
Buying A Business
California Educational Events
Deal And Escrow Issues
Due Diligence Issues
Franchises For Sale
General Info
How To Buy A Business
How To Sell A Business
Legal Topics
Selling A Business
Small Business Financing
Recent Contributors:
Recent Blogs & Articles:
The Steps In Selling A Business With A Business Broker
Increasing Your Laundry Business, Getting Your Laundromat Ready For Sale
Retiring Baby Boomers And Their Effect On California Small Business Sales
Increasing Your Laundry Business, Getting Your Laundromat Ready For Sale
Retiring Baby Boomers And Their Effect On California Small Business Sales
Recent Commentors:
500 New & Refreshed Detailed Postings Daily
