Questions to Ask When Buying a Business

A guide for anyone thinking about buying an existing business.

Buying a business can be a smart move. But it can also go very wrong if you don't ask the right questions before you sign anything. This guide walks you through the key questions to raise with a seller, and explains in plain terms why each one matters.

These questions are grouped by topic. You don't need to ask them all at once, but you do need answers to all of them before you commit.

1. Why Is the Seller Leaving?

This is the first thing to understand. The reason a seller gives you on the surface may not be the real reason.

Why are you selling the business right now?

Why ask this: Sellers often say "retirement" or "other interests." That may be true, but it may also mean the business is struggling, the industry is shrinking, or a big competitor just moved into the area. You need to know the real answer.

How long have you been thinking about selling?

Why ask this: A seller who decided very recently may have spotted something worrying — a new regulation, a key customer leaving, or a drop in demand. A sudden decision to sell is always worth probing.

Have you tried to sell this business before?

Why ask this: If it has been listed for sale before and didn't sell, there is usually a reason. Previous buyers likely found a problem during their checks. Ask what happened and why those deals fell through.

What will you do the day after the sale is completed?

Why ask this: If the seller has no clear plan, they may find it hard to step back. That can cause problems during your first months, when you need space to run the business your way.

2. Are the Financials Accurate?

The asking price is almost always based on a multiple of the business's earnings. So the earnings figure needs to be accurate — and verified.

Can you provide three years of filed tax returns?

Why ask this: Internal spreadsheets can be altered easily. Tax returns filed with the government are much harder to manipulate. If the seller hesitates to share them, that is a warning sign.

Which specific add-backs are included in the earnings figure?

Why ask this: Sellers sometimes adjust the earnings number by removing certain costs, claiming they won't apply under new ownership. Some of these adjustments are fair, like the owner's personal salary. Others are not, like claiming personal holidays as a business expense. You need to see each one and decide if it holds up.

Are the financial statements prepared by an outside accountant?

Why ask this: Statements put together by the owner alone carry the least weight. Statements reviewed or audited by an independent accountant are more reliable. The higher the level of outside verification, the more you can trust the numbers.

Why did revenue or profit drop in any particular year?

Why ask this: A one-off dip can be explained. A pattern of falling margins is a real concern. If the business is earning more but keeping less, something is getting more expensive, and you need to understand what.

What does the accounts receivable aging report show?

Why ask this: This tells you how much money customers owe the business and how long it has been owed. Money owed for more than 90 days is often never collected. You don't want to buy a business and inherit unpayable debts that are listed as assets.

Are all staff paid through formal payroll?

Why ask this: If workers are paid informally in cash, you will face higher costs once you put them on proper payroll with taxes and benefits. This affects how much the business actually costs to run.

3. How Does the Business Actually Run?

Cash flow tells you what the business earns. Operations tell you what it takes to earn it.

Can the business run without you for 30 days?

Why ask this: If the answer is no, the business depends entirely on the current owner. That makes it risky. You would be buying a job that only works if the seller is still involved, not a business with real value.

How many hours a week do you spend working in the business?

Why ask this: An owner who works 60 hours a week to keep things running means you will need to do the same, or hire someone to cover their role. Either way, that's a real cost not shown on the profit and loss statement.

Do you personally manage the top customers?

Why ask this: If customers are loyal to the person, not the business, they may leave when that person leaves. You need to know whether those relationships can transfer to a new owner.

When was the inventory last physically counted?

Why ask this: The value shown on paper for stock can be misleading. Products may be damaged, obsolete, or simply not there. A recent physical count gives you an accurate picture of what you're actually getting.

What is the remaining useful life of major equipment?

Why ask this: If key machines or vehicles need replacing soon, that is a major cost coming your way. It should reduce what you offer to pay. A seller may not mention this unless you ask directly.

Is any equipment leased or used as security for a loan?

Why ask this: Equipment that looks like it belongs to the business may actually be tied to debt. You need everything transferred to you with no strings attached at the point of sale.

4. What About the Lease and Location?

Can the lease be transferred to a new owner?

Why ask this: The landlord does not have to agree to a transfer, and sometimes uses a business sale as a chance to increase the rent or change the terms. You need to see the lease and understand your rights before you proceed.

Are there any upcoming changes to zoning or local infrastructure?

Why ask this: A road being closed, a new development going up nearby, or a change in how the area is zoned can all affect the business significantly. Local council records can reveal plans that the seller may not have mentioned.

5. What About the Staff?

Who are the key people in the business, and what do they earn?

Why ask this: Every business has a small number of people who hold the knowledge and relationships that make it work. If those people leave after the sale, so might the value. You need to know who they are and what it would take to keep them.

Do any key staff have agreements not to compete?

Why ask this: If a manager leaves and sets up a competing business nearby, that is a direct threat to you. Non-compete agreements provide some protection. If none exist, you may want to put them in place as part of the deal.

6. What Are the Risks?

Does any single customer make up more than 20% of revenue?

Why ask this: Losing one major customer should not threaten the whole business. If it does, that concentration of risk makes the business fragile. One person leaving could cause serious damage.

How dependent is the business on its main supplier?

Why ask this: If one supplier raises prices or goes out of business, what happens? A well-run business has backup suppliers already identified. If it doesn't, supply disruption becomes your problem the moment you take over.

Are there any current or threatened legal disputes?

Why ask this: Legal claims can follow the business even after it changes hands. You need to know about any disputes before you buy, not after.

Do you own the website, brand name, and social media accounts outright?

Why ask this: These assets should belong to the business entity you are buying, not to the owner personally. If they are in the owner's personal name, transferring them can be complicated or even disputed later.

Are there any environmental liabilities connected to the property?

Why ask this: This is particularly important for manufacturing, automotive, or cleaning businesses. Environmental clean-up costs can be enormous and fall on whoever owns the property.

7. What Happens After the Sale?

How much training is included in the purchase price?

Why ask this: Most deals include several weeks of handover support from the seller. For a complex business, you may need more. Make sure the training period is long enough for you to actually learn the operation before you're running it alone.

Will you sign a non-compete agreement?

Why ask this: The seller should not be able to take your purchase money and then open a competing business nearby. A non-compete agreement with a geographic limit and a time period is standard practice. If a seller refuses, ask why.

Are you open to seller financing?

Why ask this: When a seller agrees to leave part of the purchase price as a loan to be paid back from future earnings, it shows confidence in the business. A seller who wants to be paid entirely upfront and walk away has less personal stake in the business continuing to perform well.

What would you change about this business if you were staying?

Why ask this: This question often produces honest answers. Sellers who have been running the business for years know exactly what has been frustrating them or where there is room to grow. Their answer is valuable information about what is possible under your ownership.

What do you think are the biggest threats to this industry in the next three years?

Why ask this: A business that has been successful recently may face real challenges ahead from new technology, regulation changes, or shifts in customer behaviour. You need to make sure the business you are buying has a future, not just a past.

The seller is motivated to present the business in the best possible light. That doesn't mean they are dishonest, but it does mean the burden of uncovering problems sits with you. Every question on this list exists because someone, at some point, didn't ask it and paid the price for that later.

Take your time. Get answers in writing where you can. And before you spend money on lawyers and accountants, make sure the basic answers point toward a deal worth doing.