Questions to ask when buying a business

It can always be helpful for buyers to consider things from the seller’s perspective. Some questions buyers should ask might include:

  • Why is the current owner selling?

  • How long has the business been established?

  • How long has the current owner owned the business for?

  • How long is remaining on the lease of the premises, and what are the options to renew the lease?

  • Will the seller agree to sign a non-compete covenant?

  • How many different customers does the business have per year?

  • If only a small number of customers, are there contracts in place with the customers and if so, how long is remaining on the terms of the contracts?

  • Are there any repeat customers, and if so what percentage of sales comes from them?

  • Do a small number of customers make up a large percentage of sales?

  • Are sales seasonal? That is – do some months have greater sales than others?

  • What marketing activities do you undertake and what has worked the best?
  • How many different suppliers does the business use?

  • If the business is reliant on a low number of suppliers, are there contracts in place with these suppliers and how long is remaining on the terms of the contracts?

  • What is the business owner paying himself/herself? Is this shown in the financial statements?

  • How many hours per week does the current owner (and family members) work in the business?

  • How has the asking price been calculated?

  • Is the current owner willing to stay on for a period of time to provide training?

  • Is there a business plan?

  • Are there any contracts in place with staff?

  • Are staff remuneration packages documented?

  • How long has each staff member worked for the business?

  • Has annual leave & long service leave been accrued? If so, will it reduce the final purchase price?

  • Is there an additional cost for stock? If so, how much?

  • Is there any old or obsolete stock on hand?

  • If the business is a company, are you buying the shares in the company or the assets of the company? You should see a solicitor about this.

Please note this list of questions is provided as a guide only and should not be considered as a complete or absolute list due to the wide variety of business types and structures.

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