Buying a business is not just finding that thing to match your skills or passion. It’s not just signing on the bottom line. Sometimes that is not enough.

Before you put your signature on that offer, be sure to ask these questions of the seller and their business advisor.

Questions all buyers should be asking

1. What are your challenges right now? You want to be aware of potential minefields. For example, are you buying a business that will need $1 million in capital improvements? Then you need to know that while you’re still negotiating the purchase.
2. What would you have done differently? This may put the seller on the spot, but this question can get them talking about opportunities they haven’t pursued but would have liked to. This will help you learn how much growth potential the business offers. Are there untapped markets, additional product lines, or new marketing opportunities waiting out there? .
3. How did you arrive at the asking price? Often, sellers will base their asking price on arbitrary factors such as how much money they need to move on with their lives. Instead, find out the quantative information to to back up the asking price. You want to understand their thought process and know your bargaining power. If the asking price was set arbitrarily, there’s likely room for negotiation.
4. What will you do instead if you can’t sell? Learning the owner’s alternative plan if he can’t sell the business is another way to determine your bargaining power. For example, if the owner plans to give the business to an employee or close it down, you may have more room to negotiate a lower price.
5. Do you have any past, pending, or potential lawsuits? The last thing you want to inherit is a lawsuit. Ask about pending or past litigation and avoid a business that will get you involved in legal proceedings. For your protection get the response in writing in case the owner misrepresents any legal matters that could come up later
6. How well documented are the procedures of the business? Often small businesses have no set procedures in place. This may work for the seller, but you need some sort of direction, such as company policy and practices manuals.
7. How much does the business depend on a key customer or vendor? You may be buying a business that looks successful. But if it relies heavily on one customer or supplier, you could be taking a big risk. If major clients or vendors feel loyalty to the previous owner, they might leave once you take over.
8. What will employees do after the sale? Are employees aware of the pending sale and what their plans are? In case key employees decide to leave, make sure they sign non-compete and non-disclosure forms so they don’t take customers or business practices to a competitor.
9. What skills or qualities do I need to run this business effectively? What skills or leadership qualities are most important to keeping the business going? Determine if you have them…or can learn them. If your physical or personality traits don’t fit with the business needs, this may not be the business fit for you.