There are so many moving parts to a business, and knowing the right questions to start asking when buying a business can help ease the strain of the process. Here are some important questions to consider asking to set you off on the right path.
What to ask the previous owners
Engaging with the previous owners and acquiring knowledge of the operation about the business will be key. You should ask questions that relate to how the business is currently managed, operated, and positioned. Questions should include:
- How will current clients and suppliers be managed?
- What are the opportunities going forward?
- Who are the competitors?
- What is the target audience?
- Are there are any setbacks and threats to the business?
- What’s the status of the employees/employee retention?
How much money can I add to the transaction?
The more money you can commit to the total sale price, the more you can increase the leverage you will have in negotiating the final price and the terms and conditions of the sale. It will also determine the size of the business you will be able to purchase and the type of financing that will be available to you. The more money you can put down up front, the more resources you will have available, including options from lenders.
What type of financing strategy do I require?
Once you understand how much money you can put towards the transaction, your next step is to figure out what type of financing you can obtain, along with your tolerance for debt load. This will include whether you’ll be engaging in any partnerships, have access to equity investors or angel investors, and the types of financing that will be available to you.
What is my business strategy and focus?
It will be crucial to have a detailed business strategy outlined, as this will be critical to lenders and your financing strategy. Knowing the current positioning of the business in the market and if you plan to maintain or expand the operations is important. You will want to be able to answer and include the following questions in your strategy:
- Do you understand the current revenue structure and operations of the business and how do you plan to structure this in the future?
- Will your business strategy include upgrading equipment, changing or improving inventory?
- What will your measurable targets will be?
- Will you have the resources to carry out your strategy and vision?
The first steps of purchasing a business are probably the most challenging. And being able to know what questions to ask initially will help you tackle any obstacles and set the way for a successful negotiation. Speak with your financial advisor at The Beacon Group of Assante Financial Management Ltd. for expert advice about buying or selling a business.