Questions to Ask When Buying a Business
When buying a business, one needs to know several data and information that he will need to evaluate and operate the business.
And to have these, he must ask the following questions.
Why is the business for sale?
This must be the first question that has to be asked by the prospective business buyer to the seller. Reasons and motivations must be divulged to the buyer; why the business is for sale. It must be presented to the buyer for him to decide if he is willing to take over the business. And for the sake of fair play, the seller must furnish the buyer with these.
What is the trend of the industry wherein the business is in?
Some business enterprises and industries have trends on the way down. Like the businesses of selling typewriters and other out-moded equipments, definitely these are on the way out. On the other hand, there are businesses that are not yet developed, but have great potentials.
What is the financial health of the business?
This also important to have an idea whether the business is well managed,or is nearing bankruptcy. This is also to determine how much money, and how much work must be done- to improve or to rehabilitate the business.
What are problems that the business is facing?
Selling a business has reason or several reasons. The buyer must know this for him to evaluate if he is capable and willing to run the business. The business problem might be due to financial, economic or personal reasons. Financial reason might be due to insufficient working capital, too much expansion or mismanaged financial control. Economic reasons might due to prevailing business atmosphere with respect to the particular business for sale. Personal reasons could be due to lack of time to handle the business, or business incompetence.
Who are the competitors of the business?
Business competitors are important considerations that must be evaluated. Definitely giant enterprises are harder to compete with for a new and upstart business enterprise. But this must not discourage a small business into entering the particular business field.
Will the business seller stay on the job after the sale?
This might be good or bad for the business. If the experience of the seller shows that it’s worth adopting into the future operation of the business, then it is good to request for the former owner to be on the job for some time. But it is best sometimes better for the new owner to have full control of the business enterprise.
What is the term of payment of the purchase price of the business entity?
In buying a business, it sometimes better to have some terms in settling the purchase price. If the fund is just sufficient, it is best to withhold a portion for emergency contingencies. Cost of money is also a reason to have some terms in the purchase of the business venture.