If you’re wondering what questions to ask when buying a business – you’re in the right place.
You have decided to think big, be bold, and buy a business. You are scouting platforms like BizBuySell, BizQuest, and IBBA for the perfect opportunity. Before jumping into possibly the most exciting venture of your life, take a moment to think about the business you want to buy. You need to assess its growth potential, its current capabilities, and, most importantly, your goals.
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These questions can help female entrepreneurs and businessmen identify any challenges and opportunities so they can succeed and thrive in the long run.
Here are some of the most robust and important questions when buying a small business.
12 Questions to Ask When Buying a Business
1. Why Are They Selling The Business
When buying a business, you need to know what questions to ask, and this is an obvious one. Try to figure out if people are selling the business for personal reasons like retirement, a new challenge, or more personal time. Are there external reasons like a difficult financial climate, poor decision-making, or unfavorable industry trends?
Key point to consider: What is the primary reason for them selling their business
2. What Customer’s Problem Does This Business Solve?
Most successful companies address a need or help people overcome challenges. Understanding the core aspect of the business can help you understand how and if you should move forward with the deal. Dig into testimonials and reviews to try to find the answer yourself.
Key points to consider: How effectively does the business solve customers’ problems?
3. What Is the Business Model (Can You Get Good Margins)?
Naturally, you want your business to be profitable and that means you need to understand the business model. The business model includes products, services, and expenses. Your business model will significantly affect your profit margins. So ask yourself, is it a subscription model, one-time sales, or service-based model? These are crucial questions to ask when buying a business if you want to be financially viable.
Key point to consider: What is the primary revenue model?
4. Is the Business Model Scalable?
The secret to hitting 8-figures is to think scaleable. If you want maximum growth potential, you need to assess whether or not the business is scalable. Can you improve profit margins while increasing sales and diversifying your markets?
Key point to consider: What are the barriers to scaling the business (e.g., infrastructure, capital, talent)?
5. Where Do I See the Business in 3, 5, and 10 Years from Now?
At BusinessWomen, we want women to think big, set audacious goals, and be bold. So ask yourself where you see this business going in the medium-term and long-term. This is often an overlooked question to ask when buying a business but an important one. You need to buy a business that feeds into your mission, and that you can visualize succeeding.
Key point to consider: What are the short-term (3 years), medium-term (5 years), and long-term (10 years) goals for the business?
6. Who Are Their Customers?
It is important to think about a business’s customers as this can give you a lot of clues about the business. You can understand the business’s market reach, stability, and potential for growth.
Key point to consider: Are there any major clients, contracts, or customers that significantly impact revenue?
7. In What Markets Do They Operate?
This question can help you gauge the company’s presence and potential for expansion. Are they already in big markets or could they try to expand? These are crucial questions to ask when buying a business.
Key point to consider: How does or could the business perform in different markets?
8. What Does the Team Look Like?
If you plan on buying a business, you will probably take on an existing team. You need to understand the team’s structure, expertise, and morale. This can give you insights into the existing company culture, retention, and turnover rate. All these factors can impact your profit margins and growth.
Key point to consider: What is the overall employee retention rate and job satisfaction?
9. How Is the Business’ Financial Health?
This is one of the more obvious questions to ask when buying a business. A thorough financial analysis will help you to understand the company’s past performance, stability, and potential. You might want to look at financial statements for the past three years, from income statements to cash flow statements and assets.
Key point to consider: Do the financial statements show consistent revenue growth or fluctuations?
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10. Who Are Their Biggest Competitors?
Understanding the competitive landscape is crucial to understanding your business. It can help you understand the position of your company, threats, and opportunities. It is important to consider both direct and indirect competitors.
Key point to consider: How saturated is the market, and who are the significant players?
11. How Does This Company Differentiate Itself?
How the company differentiates itself will tell you a lot about its market position, and how it could potentially attract and retain customers. Differentiation can be based on various factors, including product quality, pricing, customer service, and innovation
Key point to consider: What strategies does the business use to stand out in the market?
12. What Is My Exit Strategy?
It may seem strange to think of an exit strategy when you are about to enter a business but it is an important question to ask when buying a business. Knowing how you plan to exit the business helps you set long-term goals and helps you to maximise your investment. It will also force you to think about the timeline for your business and potential exit strategies like selling the business, merging, or an IPO.
Key point to consider: What steps need to be taken to prepare the business for a successful exit?
Think Big, Be Bold
These are the best questions to ask when buying a business. They can help women set the stage for success, growth, and happiness. From thinking about whether the company is scalable, its team, to how it differentiates itself – these are all crucial factors that can determine whether your business will be successful in 2024. These questions, coupled with essential principles of entrepreneurship, can guide you toward growth and success. These questions can also help you to develop a robust business plan.
If you have bought a business or want to, we want to know what other vital questions you would ask. Let us help and lift other female entrepreneurs to think big and boldly chase dreams.
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