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Top 5 Questions to Ask Before Buying a Business

Some people opt to purchase an existing business, allowing them to avoid the challenges of the startup period. There are a lot of advantages to buying a business instead of building a new one. However, there are also certain risks involved. Asking the right questions is an important step when you’re considering acquiring a business. When you’re thinking of buying a business, there are no wrong questions to ask.

Here are the top 5 questions to ask before buying a business:

Why are you selling the business?

This should be the first thing that you should ask. The owner should be able to give a straightforward answer as possible. Understanding the owner’s reasons for selling also reveals a lot about the state of the business.

Follow up questions:

If you don’t have the option to sell, what would you do?

This is a good time to learn about untapped markets and the growth potential of the business.

What would you have done differently?

The answer to this will help you prepare for potential challenges that may arise in the future.

What are your biggest challenges right now?

Follow up questions:

What skills or qualities do I need to run this business effectively amidst all these challenges?

You need to be able to identify the leadership qualities and skills that are needed to keep the business going. If you find out that you don’t have these skills, you might need to look for someone who has them or start learning them yourself.

How do you record the finances of the business?

There should be a clear and transparent paper trail for the financial data of the company. You need to be able to access tax returns, profit and loss statements, and other important documents. Whether the current owner claims that the business is doing well or not doing so well, make sure that there is concrete financial evidence to back up the claim.

Follow up questions:

How does the business generate income?

You have to determine whether the business has multiple income streams.

How much working capital do I need?

It is important to dig deep into the valuation of the business.

What are the systems, procedures, and processes of the business?

When you acquire a new company, you’ll need a starting point – a set of directions to guide you in operating the business. According to small business consultants, even small businesses need SOPs (Standard Operating Procedures).

When you have the systems and procedures in place by the time of purchase, then you can hit the ground running and start running the business as soon as possible.

What is the market like and who are your customers?

All businesses should have a clear understanding of who their target market is. Aside from understanding your market, you should be able to know who your direct and indirect competitors are. The business should have a unique selling proposition that sets them apart from its competitors.

Business consulting experts are in agreement when they say that in acquiring a business, the more questions you ask, the less risk there will be. You need to dig a little deeper to make the right decision.

Before you buy a new business, we can help you make the right decision. Contact Portfolio Management Group today for a free, no-obligation consultation.”

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