How to Buy a Business

If buying a business is one of your dreams, you are going to have to be armed with the right ammunition as you go through the buying process and learn how to buy a small business. Understanding the top fifteen questions you should ask before buying a company can help ensure that you make the right decisions when buying a small business.

1. Why is the Seller Selling? While this may seem like an obvious question to ask, the answer that you receive may not give you the complete picture of your new business. Take the seller's answer as a starting point rather than a complete explanation.
2. What Kinds of Contracts Exist with Current Vendors?
   When the company becomes your own business, you do not want to be surprised and find out that you are contractually tied to a vendor with whom you have had problems in the past. In addition, you will want to get a feel for the company's overall relationships with its vendors.
3. What is Covered in the Sale?
   Will you take over an existing lease? Are equipment and vehicles included in the sale? Are you going to buy patents or trademarks?
4. What Debts Will You Have to Take Over?
   Make sure that you understand not only what debts are included in the sale, but what your state's legal requirements are.
5. Are Employees Aware of the Impending Sale of the Business?
   If the employees are aware, how are they reacting? If the employees are not aware, why has the current owner chosen to keep them in the dark?
6. What are the Working Conditions in the Operation?
   Is the facility clean and well kept? Are office spaces messy or organized?
7. Is the Company's Equipment Being Maintained?
   Ask to see the company's maintenance records.
8. Do Family Members Work for the Company?
   If asked, will they stay?
9. What is the Company's Position in the Industry?
   Is the company losing market share, holding market share or gaining market share? Regardless of whether the company is gaining or losing in the market, ask why.
10. Is the Current Owner Willing to Stay for a Designated Period?
    Having the current owner stay through a transition period may be beneficial to you.
11. Is the Owner Willing to Help You with Financing?
12. Has the Company Been Involved in any Legal Disputes?
    If the company has been involved in legal disputes, find out how the disputes were resolved. Do not forget to ask if there is any pending litigation against the business.
13. Have You Examined All of the Financials?
    Make sure that the owner has provided all of the appropriate financial information to you during due diligence.
14. Will the Owner Sign a Non-Compete Agreement with You?
    If the owner is not willing to negotiate a non-compete agreement with you, you might want to take a pass.
15. What is this Business Truly Worth to You?
    Do not let yourself get caught up in the momentum and excitement of buying a business. Make sure that you make a truly rational decision about buying. Consult with your lawyer, your accountant and your bank.