Business Acquisition: 5 Important Questions to Ask the Seller Before You Buy

May 10, 2017
CLARK.LAW

An existing business can present a range of opportunities for a keen-eyed entrepreneur. You have a chance to bring your unique experience to a business with existing customers, trained staff, and a fully-realized concept. Before you commit, you may be wondering whether this business is right for you—and whether you’re the right person for the job. Ask your seller these key questions before making any acquisition decisions.

  1. What is your reason for selling?

The “why” factor is important to understand from the seller’s perspective. You’ll want to know what’s motivating the seller to let go of the business, including any major challenges. You might realize that these challenges are too great for you to overcome. On the other hand, you might find that you have the perfect skill set, experience, or resources to address these problems yourself.

  1. What would you do differently?

For some extra insight into the pros and cons of an acquisition, ask sellers what they would do differently if they had the chance. Whether the answer involves missed opportunities, a lack of capital, or a problem with the business model itself, it can teach you about the business’ potential for growth—and any possible pitfalls. It can also ensure you don’t repeat the seller’s previous mistakes.

  1. What does the business do for its customers?

A seller should be able to describe exactly what problem the business solves for its customers, or what value its products and services deliver that can’t be found elsewhere. Why should customers buy from them instead of others? Why do their existing customers stick around? If the seller can’t answer this question succinctly, there may be an inherent problem with the business’ concept.

  1. Does this market have a future?

While it’s important to understand how the business benefits customers in the here and now, you must also consider its potential to grow in the future. Can you expect ample opportunities within your market in the years and decades to come? This can be easier to predict in some industries and more difficult in others, but the seller should have an idea of whether demand will grow or dissipate over time.

  1. How do you deal with the problems unique to your business?

Every business comes with its own set of benefits and challenges. Ask your seller about the common difficulties that come up in his or her business, and be sure to ask how these problems are usually handled. In all likelihood, you’ll need a certain range of skills to run the business efficiently, and this question can help you understand whether you’re up to the task.
When entrepreneurs and business owners have difficult decisions to make, they should be able to rely on professional assistance. The Law Office of Chris Clark, PLLC is here to guide you through the process of a merger or acquisition. Whether you need negotiation expertise, contract proficiency, or strong representation in a dispute, give us a call for trustworthy legal counsel.

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