Questions to Ask When Buying a Business

Josh Moore

Buyer Articles Buyer FAQ

If you’re considering buying a business, you probably have a lot of questions. 

“What’s the process like?” 

“How much money do I need up front?” 

“What are my financing options?”  

These are all great questions we’ve provided answers to in our blogs “What Are the Steps to Buying a Business,” "How Much Down Payment Do You Need to Buy a Business?" and "How to Buy a Business Using an SBA 7a Loan." 

But, if you're like many buyers, you may not know what questions to ask. 

Knowing what questions to ask can help you focus your attention on the most important aspects of an acquisition, and help you determine if the business you’re interested in is a good fit for you.  

In this blog, we’ll break down the most important questions you should ask a business owner and their broker once you’ve expressed interest in their business.

Let’s get started. 

General Questions 

Before we get into some of the more nuanced questions you should ask when inquiring on a business, let’s talk about some of the more general questions you should start with.  

How these are answered could help you decide if it’s worth your time to move forward with your inquiry, or if you should focus your attention on other opportunities.  

How is the business structured? 

The way a business is structured determines the different tax implications you’ll be subject to once you step in as the owner.  

The business you’re interested in may be structured as an LLC, S-Corporation, or C-Corporation.  

S-Corps and LLCs are commonly used structures in small-midsize businesses due to their tax benefits.  

How long has the company been in business? 

Generally speaking, the longer a business has been successful, the more confident you can feel it will continue to be successful in the future.  

A business that has successfully operated for a decade or longer can come with an established reputation and consistent customer base, both of which are extremely beneficial to a new owner.  

Long established businesses can also have an experienced staff who know how the company operates on a daily basis, making your onboarding process much smoother.   

Who are your competitors, and what makes you different? 

Knowing where a business stands amongst competitors can help you learn about what separates the business from others in their market, and help you understand what improvements could be made.

Also, to truly understand the business you’re interested in, you need to know what makes it unique. That is, what makes customers choose to do business here instead of somewhere else?  

When speaking with business owners, you’ll often notice this is something they're usually excited to talk about.

Learning about this aspect of a business can help you continue to offer what the customer base wants and prevent from straying too far from what makes the business successful. 

What differentiates the business from its competitors? 

To truly understand the business you’re interested in, you need to know what makes it unique. That is, what makes customers choose to do business here instead of somewhere else?  

When speaking with business owners, you’ll often notice this is something they're usually excited to talk about.

Learning about this aspect of a business can help you continue to offer what the customer base wants and prevent from straying too far from what makes the business successful. 

What is the status of equipment maintenance/repair?

This question can be helpful to ask for several reasons. First, knowing how well equipment is maintained can indicate how the rest of the business is operating.  

A business with routinely serviced or updated equipment usually means the owner (or someone on staff) is on top of the business’s operational needs. 

Additionally, well-maintained equipment can mean fewer expenses for you in the first few months of owning the business, so you'll want to ask about any equipment  that may be in need of replacement or repair at the time of your acquisition. 

What is a general description of the business’s products/services? (with revenues)

This one probably goes without saying, but you should have a good understanding of what the business offers when you’re interested in purchasing it.  

Knowing what specific products and services generate the most profit for the business could inform your decision if you want to serve a particular end-market and give you a feel for what your responsibilities will be as an owner. 

What licenses are required to operate the business? 

This question can be crucial depending on the industry of the business you’re interested in. In construction, for example, it's required for the owner to hold a general contractor’s license if the business completes projects with a total value of $30,000 or more.  

We’ve seen instances in which buyers did not have the required license, and struggled to pass the required tests to obtain licensure.  

Some tests are easier to pass than others, so be mindful of licensure requirements, and how difficult the tests are before you commit to buying a business.  

Failing to do so can create major hold-ups and make it hard to secure SBA financing.

Financial Questions 

Financial Questions Buying a Business

Now that we’ve discussed some of the more general questions you should ask when buying a business, let’s get into a few financial questions.  

You want to be mindful of how you ask for financial information when inquiring on a business. Being too forward too quickly can cause a seller or their broker to feel uncomfortable with you and prevent you from being pushed through to the next steps of the acquisition process. 

On the other hand, if you don’t ask the right questions, you may waste your time getting pushed through to the next stages when it wouldn't be a good fit. 

Ask about add-backs 

When a business is valued, it’s done so based on a multiple of that business’s annual earnings.  

To give buyers a real sense of what the business makes, it’s necessary for certain expenses in the business’s financials to be added back. 

You can expect to see general add-backs like officer salary, health insurance, fuel/vehicle expenses, interest, depreciation, and amortization.  

Others may require further explanation. If you aren’t comfortable with some of the add-backs being made, ask what they are, and take the advice of your attorney or CPA when you get the answer.  

What are the business’s growth opportunities? 

If you’re inquiring on a business, one of your top concerns is going to be about the business’s growth opportunities.  

The seller may be nearing retirement and therefore not as invested in growing the business, but there’s a good chance they’re aware of something that could be done to help it grow. 

Asking about growth opportunities can give you a better understanding of the business’s future earnings potential if you were to you successfully implement those changes.

It may also indicate that there aren’t many substantial growth opportunities, which could affect your level of interest in the business if it’s on the border of meeting your earnings requirements.  

Do you use cash or accrual accounting? 

Knowing a business’s accounting method can help you prepare for the possibility of wildly inconsistent numbers before you gain access to the financials.  

Accrual accounting does a better job at painting a full picture of where a company is in terms of profits and losses. This method records both expenses that haven’t yet been paid by the business, and payments the business hasn’t yet collected from customers.  

For example, suppose that a construction company successfully bids on a project. Before starting the project, they’ll need to purchase the necessary materials to get the job done, which will be recorded as an expense.  

Even though these expenses have been recorded, all payments for the project won’t be collected by the construction company until several months later. 

Accrual accounting will reflect both the expense and the associated profits on the profits and losses statement even if all expenses haven’t been paid and all payments haven’t been collected.  

Contrastingly, cash basis accounting doesn’t record profits until payments have been received, nor expenses until the business has paid them.  

This can create P&Ls that vary by hundreds of thousands of dollars from year to year.  

For example, let’s say a construction company has a project set to start in January.  

In most every case, the company would have expensed the necessary materials for that project before it started, in this case on the previous year’s P&Ls.  

The difference is that with cash accounting, the profits from the project won’t be reflected until the following year when payments are collected.  

This means that on one year’s profit and loss statements, there is an expense for a few hundred thousand dollars, but no profit to balance it out, making it appear as thought the company performed worse than it actually did.

Conversely, in the next year there will be a large profit recorded with no associated expense, making it look as though the business was far more profitable than it really was.  

Owner Questions 

A big part of buying a business has to do with getting to know the owner and learning about their role within the company.  

Let’s take a look at some of the questions you should ask the person selling the business you want to buy. 

What’s your reason for selling? 

This is one of the most important to ask seller.  

There isn’t necessarily a right or wrong answer to this question. Rather, it’s important for you to feel comfortable with the answer the owner provides before you proceed.  

Some people would shy away if a seller told them they were working sixty hour weeks, but others may be looking for an opportunity that would require that kind of workload.  

Again, it’s really all about preference here.  

Will you train me after the sale? 

This one is huge.  

Even if you’ve owned a business or have industry experience, it’s important to remember: every business is different, and businesses with heavy owner involvement will require extensive training to properly assume their role.  

The experience you have may shorten the training period you’ll require, but you’ll need to spend at least some time with the owner in the business before setting off on your own.  

Whether you need 200 hours of training or 50 hours, you’ll want to be sure the seller is willing to meet your needs. Some sellers are more willing to offer longer training periods than others, so get clear on this before making any commitments and ensure this is put into any agreements.


It's worth noting that if you're using SBA financing, you cannot keep the seller on as an employee, and you can only pay them for their consultation services for a maximum of one year.

What is your level of involvement in the business? 

Ideally, the owner is not the hardest working/most important person in the business. 

Preferably, they utilize a management team to manage the company’s day-to-day operations while focusing on high level issues.

If the business depends entirely on the owner to operate, it can make it much more difficult for you to step in and successfully run the company. 

Even if you don’t mind stepping in and getting your hands dirty, you’re taking over their position, so you need to know what you’re signing up for. 

What is your management style? 

If your management style and the seller’s management style are totally different, that could become a point of concern.

The employees are used to a certain way of doing things, so they may not be as productive or willing to stay if you come in and change everything. 

Do you have any family members in the business? 

A business with employees who are also family members of the owner isn’t always an issue, but it is something to be aware of.  

Oftentimes, family members in the business will feel connected to the owner and their way of doing things.  

This can create issues if they were used to receiving certain benefits or privileges that you no longer intend on providing them.  

Legal/Environmental QuestionsLegal questions buying a business

Buying a business with pending legal or environmental issues can be done successfully with the right team in place, but it can also cause some headaches that you’d prefer to avoid.  

Here are a few questions you’ll want to ask to make yourself aware of a company’s environmental and legal statuses.  

Are there any potential environmental issues with the business or its real estate? 

Environmental issues that aren’t disclosed early on can cause major holdups throughout a deal, or even cause it to fall apart completely.  

If you’re purchasing the business’s real estate, the SBA will often require a phase 1 report to be done to determine if historic or current property uses have negatively impacted the soil or groundwater on the property.  

Depending on the results of the report, your financing and the timeline of the deal can be greatly impacted.

Are there any pending lawsuits? 

Sellers will often agree to handle any pending litigation should they be in the middle of a lawsuit as the deal is being completed.  

Nonetheless, you’ll want to know about any potential or current lawsuits ahead of drafting reps and warranties to make sure you aren’t held liable for something done in the business before you bought it.


This is especially important with stock sales, as you are assuming all current and past liabilities of the business. Don't leave any skeletons in the proverbial closet.  

Real Estate Questions

Whether or not you’re interested in purchasing the business and real estate as a package deal, you’ll still want to ask a few questions about the business’s real estate.  

This can affect your monthly lease payments, and your ability to continue doing business out of the same location depending on who owns the property.  

Do you own the real estate? 

If the owner of the business also owns its real estate, you may be interested in buying the property. This can be an attractive option for many buyers because it can make it easier to secure financing.  

A business’s real estate is also a physical asset that you can pay off using the proceeds of the business over time so that when it comes time for you to sell the business, you can also profit from its property.  

Is your lease assignable? 

If the seller doesn’t own the business’s real estate, you’ll want to ask if the lease is assignable. This will help determine if the owner can assign the lease to you, or if the lease will be assigned by the owner of the property.  

Is there any concern the landlord won’t extend me a lease? 

This can be a tricky situation to deal with. In some scenarios, the owner of a business’s real estate might not want to lease the property to buyers once the business is sold.  

If this happens, there is always the option to relocate, but as you can imagine, this comes with extra expenses and a lot more work for you. Depending on the business and where it’s located, moving locations can also be bad for business.  

Asking about this up front isn’t guaranteed to give you a sure answer, but having it on your radar can be beneficial.  

Employee Questions

When buying a business, you’ll typically want to keep the employees who have made the business successful, so there are a few things you’ll want to ask about them.   

How much are employees paid? 

Depending on the industry, it’s always possible that the standard salary for certain employees are on the rise.  

You’ll want to know the salaries of the different roles within the company and compare them to the industry standard in order to predict any future expenses regarding payroll.  

How many employees are there? 

Knowing how many employees there are may sound like a simple ask, but you’d be surprised at how many business owners don’t know off the top of their heads how many employees they actually have.  

If you prefer a business with fewer employees to manage, then this could be an important thing to consider.  

Would any of your employees leave after you sell the company?

Oftentimes, small to midsize business owners have developed meaningful relationships with their employees throughout the years.  

It’s not uncommon for a handful of employees to have been with the business for a decade or more, and they enjoy the benefits of the relationship they have with the owner.  

This can cause employees to consider leaving the business when the previous owner leaves, which can be bad news for you if those employees play a big part in the business’s success, which they often do.  

Knowing if any employees plan on leaving with the owner can help you determine if you’ll need to request additional training for key employees and prepare for a transition period.  

Do you E-Verify your employees? 

E-verify is a service that allows business owners to verify the eligibility of their employees to work in the U.S.  

Generally speaking, a business with undocumented workers can be risky to acquire due to the penalties associated with hiring them.  

These penalties can range from $375 per employee to $3,000 per employee, so make sure to verify this when working with a seller.  

Miscellaneous Questions 

How long have you been trying to sell? 

It’s not uncommon to take 1-2 years to sell a business, but if the business has been trying to sell for many years, it could signal a looming issue. 

Have you almost sold to anyone? 

If a business owner was once close to selling their business, but the deal fell through, you’ll want to know why. It’s possible that this was due to a buyer, but if it’s something related to the business, it’s important for you to know about.  

Who do you envision selling the company to? 

The owner knows their business better than anyone else and has probably imagined or knows the qualities a person would need to be successful in their role.  

Listen very closely to the owner’s answer. If they truly are looking for a buyer that’s going to take over the business and be successful, they’ll give you an honest answer about who they’re looking for, even if you don’t fit their description. 

If you don’t feel like you're getting an honest answer, that’s a red flag. 

How close is the owner to the customers? 

While it’s normal for owners to have positive relationships with their customers, you want to make sure the customers have a closer relationship to the business itself.  

If they only use the business because they’re close with the owner, that could mean you’ll lose a substantial customer base once the owner leaves.  

Do you have long term employees? 

As a new owner, the first day you own the business, you’ll be the newest employee.  

Having a team of experienced people there to keep things running smoothly is important for a successful transition. 

Wrap-Up: Approaching Sellers 

By now you're probably aware that buying a business is a decision that requires a lot of consideration.  

The best way to firm up your decision to move forward with a business is to come prepared with all the right questions.  

Remember though, it will be extremely rare for you to get the answers you want to every single question you ask. You’ll have to decide which ones are the most important, and which ones you’re willing to compromise on.

It’s also important to remember that you don’t want to bombard a seller with every question on this list during your first interaction.  

They’re making a life-changing decision by deciding to sell their business, so your thoughtfulness throughout the initial discussions will go a long way.  

If you’re ready to start inquiring on businesses, check out our Businesses For Sale page here to see our current listing. As always, if you’d like more information on the process, contact us today. 

Know Your Company's Worth

Prepare to sell by determining the value of your business.


Subscribe To