Purchasing a business can be an exciting and profitable investment. However, before you dive in, there are a few key questions you should ask the seller.

This is part of the due diligence process: researching all aspects of the business before deciding whether or not to buy. It is an opportunity for you to gain a better understanding of the business and the challenges you may face in the future.

If you’re curious to know what you should know before buying a business, keep reading. In this guide, we’ll go over nine of the most important questions to ask when purchasing a business, whether in the UK or elsewhere.

1.   What is the reason for selling your company?

One of the most crucial things to understand before purchasing a business is why the owner is selling. This will give you an idea of their motivations and expectations. It will also help you determine how flexible they are on price.

There are numerous reasons for selling a business. The owner may be retiring, relocating, or simply changing careers. However, the sale could also be motivated by declining profits. Whatever the reason, you should be well-informed so that you can decide whether or not to proceed with the purchase.

2.   How did you arrive at your asking price?

Understanding how the seller arrived at their asking price will help you determine whether their expectations are accurate and how much wiggle room there is. Among other things, the asking price should consider:

• Business assets and what they are worth
• Its gross and net profits for the year
• Its customer base, market share, and potential for growth
• Recent sales of similar businesses in the neighbourhood

Check that the seller’s business has been professionally valued by a business broker and request proof before proceeding.

3.   Is the company in debt or has any liabilities?

You’ll need to see proof of the company’s revenue and cash flow before making an offer. However, one of the most important questions to ask when purchasing a business is whether it has any debts or liabilities. As an example:

• Loans or mortgages that must be repaid
• Unpaid bills or invoices
• Any legal expenses that may be incurred
• Is there any equipment purchased on hire purchase?

This information should be contained in the financial statements provided by the seller, but it is better to verify that everything is properly accounted for.

4.   May I see your most recent business plan?

Inquire about the seller’s current business plan. This will give you an idea of the company’s goals, financial health, and growth potential.

Is the company planning any new expansions or growths? What are the present forecasts for the coming fiscal year? Are there any market changes that are anticipated to occur in the near future? These are all important questions to ask before purchasing a business, and they should be addressed in the business plan.

5.   What assets are included with the business?

If you’re buying an asset, you’ll need to know exactly what you’re getting. An asset is any valuable item, such as:

• Business premises, structures, and land
• Machinery and equipment
• Fixtures, fittings, and furniture
• Vehicle inventory/stocking at the company
• Intellectual property is an example of an intangible asset.

You must understand what is included in the business sale, as well as which assets are owned outright (and which are not). If any assets are hired or rented, you should also learn about the lease terms and conditions of these.

6.   Who are your most important employees, customers, and vendors?

When you buy a company, you take on its employees, customers, and suppliers, as well as its assets. Without them, the company would not exist, so find out:

The names and positions of key employees with the most business knowledge.

Client information for the longest-standing and highest-paying clients

Any key suppliers on whom the company relies, as well as details of any contracts in place

When buying a business, asking these questions will allow you to make sound restructuring decisions.

7.   What are the company’s major flaws or challenges?

Inquiring about the seller’s most momentous challenges will assist you in anticipating future difficulties.

Is there, for example, a significant portion of the market that the company struggles to reach? Which competitors pose the greatest threat to the company, and why? These are some of the most important questions to ask a business owner before making a purchase.

The current owner should provide an honest assessment of the company’s shortcomings. It could be a red flag if they refuse to be open with you.

8.   Do you have any previous, ongoing, or anticipated legal issues?

When purchasing a business, it is critical to conduct legal due diligence. This entails looking into any past or current legal issues that may cause problems in the future. You should look into:

• Whether or not the company has ever been sued
• If there are any current or anticipated claims from employees or members of the general public,
• Whether the company has all necessary licences and permits.

Remember that if you acquire a business with outstanding legal issues, you may be held liable. Allow an expert to perform due diligence to ensure that there are no hidden issues.

Hire Yorkshire Change for Buying a Business

Get in touch with Yorkshire Change today if you’re thinking about buying a business. We specialise in M&A change management and can match your aspirations of buying a business to help expedite finding you a profitable, successful businesses in various industries as merger and acquisition experts.

We can handle everything for you, from negotiations to due diligence, so you can rest assured that you’re getting a good de