FAQ Buyers Ask - bizbrokersusa.com

FAQ a Buyer Might Ask

Listed below are some examples of questions a potential buyer of a business might ask before buying a business. Feel free to use this checklist to assist you in making your business decision.

_____ Why is the business for sale?

_____ What is the history of the business?

_____ What is the background of the founder(s) and key management?

_____ What is the outlook for this industry and this business?

_____ Is the companies income rising or declining?

_____ If the income is declining, what is the need to improve this situation?

_____ What is the company’s financial status?

_____ Ask for audited year-end financial statements. (These statements should include the balance

sheet, income statements and cash flow statements for the past 3 years. These statements

should reconcile with the companies income tax returns).

_____ In addition to the above, you should have your accountant review the key financial ratio including

gross profit to net sales, net income to net worth, and net income to total assets.

_____ What are the companies current and long term debt obligations?

_____ Are there any liens against the business?

_____ Are there any accounts that are past due? If so, how overdue are they? Is the company writing

off their bad debts?

_____ Does the company have adequate working capital?

_____ Does the company have a good working relationship with its bank?

_____ Is the company involved in any ongoing lawsuits? If so, what are the details?

_____ Was the company ever involved in lawsuits? If so, what was the outcome?

_____ What are the company’s current contracts? (Have your attorney review them. Is any business

done without a contract?

_____ What zoning or industry regulations affect the business? Are there any proposed or pending

Changes to these regulations that could affect the business?

_____ What is the target market for the business?

_____ Is the market growing, stable or shrinking?

_____ Does the business rely too heavily on a few key customers? What would happen if those

customers left?

_____ Who are the company’s primary competitors? How successful are they, and what are their

Growth prospects?

_____ How much market share does the business command? How does it compare to the competition?

_____ What sales channels does the business use? Which are the most and least effective?

_____ What marketing methods does the business use? Which are the most and least effective?

_____ Are the business sales consistent, or do they vary seasonally?

_____ What is the sales history for the past few years? What are the projected sales?

_____ If the sales are rising, is the increase due to growth in the market or to raising prices?

_____ Does the company own any intellectual property, proprietary processes or exclusive products?

If so, will the ownership rights transfer to you?

_____ Does the company own or lease its location(s)? What are the terms of the mortgage or lease?

Can you take over the lease or assume the mortgage?

_____ Does the company own or lease its location? What are the terms of the mortgage or lease?

Can you take over the lease or assume the mortgage?

_____ Does the business own or lease its equipment? If the latter, can you take over the lease? Is the

equipment current or outdated?

_____ What is the company’s reputation? Use social media, visit online ratings and review sites.

Contact the Better Business Bureau and talk to existing customers and suppliers to get a fuller

Picture.

_____ Does the business have current licenses, permits and /or certifications from industry

Organizations?

_____ Does the company enjoy a strong brand recognition in its market?

_____ What types of insurance policies are in place? Can you take over the policies as part of the sale?

_____ Who are the company’s suppliers?

_____ Are the suppliers willing to transfer the existing contracts to you when you take over the

Business?

_____ Does the business have multiple suppliers or just a few?

_____ What inventory levels does the company maintain? Too much can be a sign that the company is

Struggling to move product or is spending too much maintaining inventory.

_____ How do employee wages compare to the industry average and to average wages in the local

Marketplace?

_____ What employee benefits are offered? How much does it cost?

_____ Does the business have many long-term employees, or is there high turnover?

_____ Who are the key employees? What are their duties and positions?

_____ What is the company culture like? Is it a good fit for you?

_____ Are the employees unionized, or are they planning to unionize?

_____ Are the Key employees likely to stay on after the change of ownership?

Notes

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