Good Questions To Ask A Business Owner – Buying an existing business is a very different endeavor than starting your own. It is important to carefully weigh the pros and cons and know what questions to ask yourself and the business owner, just the right questions before finalizing your purchase.
Just like starting a new business from scratch, missing the right first steps can lead to poor operations and even closing shop. So take a look at these questions to get started on the right foot.
Good Questions To Ask A Business Owner
Before we ask specific questions when thinking about buying a business, let’s discuss some basic pros and cons of doing so. Many entrepreneurs are torn between starting their own business and buying a business, so I hope this section clears things up.
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It has become a proven business model – This is probably the most interesting. Buying a company that has been successful for many years means establishing a model and customer base, which increases the chances of future success.
Easier to start – Again, a proven business model means you can get a lot from the first equation: business plan, market research, marketing, location planning, etc. Sometimes fewer options make things easier.
Brand Building – Brand building is one of the most difficult, time-consuming and expensive aspects of running a business. It takes creativity, ingenuity and often years to develop a brand. Buying an existing business means you don’t have to worry about that.
Financing is easier to obtain – banks and other lenders are more likely to offer loans to companies with a proven track record. Securing a loan for the next location or store expansion will cost more if you buy an existing business.
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You have an immediate customer base – although some buyers may leave when the business is transferred to a new owner, the majority will likely stay (unless there is a significant change). Securing a solid customer base from the start eliminates many unknowns.
It can be expensive – buying a successful and proven company can be expensive. All the advantages mentioned above will increase your chances of success. You get what you pay for, and if it is, you will pay a lot.
You may need to make big changes – even if you buy a successful business, there may be changes you want to make. It can be expensive, hostile to existing employees, or difficult to implement.
The company can be a total scam – with proper research and due diligence it is unlikely that you will be scammed, but there is still a chance that the company may not be as successful as advertised.
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You lose the ability to be creative – just like buying a franchise, buying an existing business takes some of the fun out of creating your own and adding character.
Ok, now let’s move on to the questions traders should ask to start this process. And before you talk to a business owner, you should ask yourself to make sure you’re making the right decision.
This is the most important. You should consider the list of pros and cons above and find out which option is better for you.
Once you’ve narrowed down your list and have a few companies in mind that you want to buy, ask yourself why you want to buy that company. Don’t let yourself get complacent and buy every business that comes your way. Make sure you are passionate.
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This is another important thing. You can rely on your years of experience all you want, but you should seek advice from those around you. Ask friends and family for their input.
Once you feel confident about your motives and know what you’re looking for and find a viable option, it’s time to ask the business owner some questions.
While some of you are looking for a business that needs fixing, many are looking to buy a successful business. With that in mind, you should ask why they sell. They build companies, make them successful and generate huge profits. So what gives? This can help identify some red flags early in the process.
Of course you want to know how long the company has been around and a little about its history. Talk to the current owner about how it all started, his role in running the business and some of the obstacles they have had to overcome. Of course, it is good to buy an established and proven company, but the price is higher.
Impactful Questions To Ask A Ceo
Although aspiring business owners probably know that it takes a lot of hard work and perseverance to succeed, it’s still important to maintain at least some work-life balance. Learn more about what exactly your role as an owner looks like. This also ensures better hiring and planning in the future.
Although as an entrepreneur, you still have to pay your own salary. It is important to set these expectations from the beginning knowing if it is possible for your current personal financial needs.
While talking about money is rarely fun, it is obviously important in the process of buying a business. You need to dig into the details to determine how efficient the operation really is.
This is where you should start. A business owner trying to sell a business for a fair price will have no problem looking under the hood and seeing how profitable the operation is.
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You want to make sure that for years all the accounting is kept accurately and in accordance with the law. Ensure all tax returns, cash flow, balance sheet, payroll, depreciation, etc. You don’t want to buy a company that is secretly cooking the books.
If you are not sure how the financials end up, don’t be afraid to ask for an audit by someone who is not involved with either party. If the owner disagrees, that’s a red flag for sure. An external audit is the surest way to get an accurate valuation of a company.
You want to know about all the liabilities and assets that may come out of the agreement. On the debt side, this can include mortgage payments, leased equipment, contracts and more. Assets can include equipment ownership, existing inventory, paid locations, and some intangibles such as brand recognition.
You’ll also want to cover some legal basics to make sure you don’t have any surprises when you’re handed the keys.
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Most businesses require a permit. Some require a large number of them. Make sure you know what you need and how to apply it. The current owner should be able to walk you through everything.
Buying a larger company probably means retaining at least some of your current staff. It is important to know who is who and which employees you can trust as a leader.
You will likely need to finance the purchase of a small business, even a single location. Discuss this with the seller and find out what financing options are available. Most owners want the sale to be completed within a few years, but it depends on the seller.
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Among other things, Michał writes about trends and tips in retail for KORONA POS. It focuses on giving small business owners a more holistic approach to growth. In his free time you will find him wandering somewhere in the southwest. Connect with him on LinkedIn. Tracking business expenses is essential to managing cash flow and maximizing tax deductions. But how can you perform this boring task effectively when there are many other jobs?
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