Who to Talk to About Buying a Business​

When you’re shopping for a business, there are a lot of important questions to ask. In the process of due diligence, you need to assess the value and viability of a business, and you need to ask for financial records, tax returns and about any outstanding tax returns or creditor liens.

But just as important as what to ask is whom you ask. You can’t just rely on the motivated seller (aka, business owner). You must ask around to create a clear and concise analysis of the company before buying a business.

Who to Talk to About Buying an Existing Business

Here are the five key people you need to talk to before signing on the dotted line:

1. The Business Owner

While it’s obvious that you should talk to the business owner, you may have overlooked important questions. Outside from the obligatory financial records, ask the owner what it’s really like to own the business. Here are a few questions to ask:

• What does a normal day look like?
• How many hours do you put in each week?
• How often are you called in to work?
• Are your employees dependent or empowered to make decisions?
• Who are your best customers and why?

It’s also a good idea to find out why the owner is selling the business. The best possible answer to this question is simply retirement. However, if the owner can’t explain why he’s selling, it may be a red flag. It may be possible that the business is facing stiff competition and the owner is selling before it gets worse. Be sure to research current and future developments, and go with your gut.

2. The Accountant

If the business has an accountant, make sure to set up a meeting. It’s important to go over the financial records of the business, along with federal and sales tax information. If the company uses accounting software, ask to be logged in so you can be absolutely sure of the business's finances.

You’ll want to check that the financial records match the tax records. Pay special attention to sales tax. Many local businesses, especially restaurants, may underreport their cash receipt revenues to avoid paying sales tax. Unfortunately, if the state decides to audit the business after you’ve purchased it, you can be on the line for any unpaid sales tax, which could be thousands of dollars.

Also, make note of areas where the business may be gaining or losing money.

3. The Employees

Employees are always in the know. Not only should you talk about the business with the owner, you should also meet with the current employees.

Employees can give you an accurate idea of daily operations. They can help you understand the clientele and offer useful suggestions on how to improve the business.

Listening to and acting on employee suggestions can really benefit the new business owner. It can establish a foundation of mutual respect and goodwill. If you’d like for the employees to stay on with you, it’s a good idea to build this foundation immediately.

4. The Customers

Before buying a business, take your time to interview its customers. If the business is not meeting the customers’ needs, it’s your job to find out why not and whether it’s even possible to do so.

You’ll do that by talking to several customers. Find out what they like and don’t like about the current business. Ask for ways that the business can improve its offerings. Here are a few questions to ask:

• What can the business do better?
• What is the business’s reputation in this area?
• How do you feel about the pricing of services?
• What other similar businesses do you frequent?
• What is one service/item/product/offering you would like to see included?

5. The Suppliers

Last, but certainly not least, you should talk with the business’s suppliers. It’s important to make sure that you can continue the same contracts or deals as the previous owner. Some suppliers may be unwilling to keep the same agreement, and you should know that before you buy.

It’s also important to know if there are any liens or leased items. Ideally, all furniture and equipment should be owned outright and in good working order.

Buying a business: Final thoughts

Reduce your risk by talking to the right people and asking them the right questions. Before you enter a buying agreement, make sure you talk with these five people first.

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