Buying a Business? Ask the Right Questions
A big factor in success is asking the right questions. This principle works particularly in business negotiations. If you are a baby boomer buying a business, or if you are buying a boomer business (or both), carefully evaluate the business by asking the right questions.
A young friend of mine told me a story about a business he bought(a professional practice). Before he bought, he had several conversations with the seller, and he said he even asked, “Why are you selling this practice?” But he didn’t ask another important question: “Who knows you are selling the practice?” After the practice was finalized, he found out that the patients had heard that the practice was for sale and they switched care providers. Ouch!
Now, of course you can’t always assume that people are going to tell you the truth. People, unfortunately, lie. Another business owner told me he had asked the seller, “Why are you selling?” The guy said he was going to get married and retire to Mexico. He was actually setting up his son to take all the customers away from the new owner. Another ouch!
While you can’t always know whether people are telling the truth, you can certainly do a thorough job of checking out the business financial and legal situation. It’s called “due diligence.“ What else should you ask if you’re buying a business? Here is a short lit of questions:
- Why are you selling this business?
- Will you stay for a transition? How long? How will you make sure the customers/clients stay in the business?
- Have you had a lot of employee turnover? What is your opinion of the current employees? What about the management; are they an asset to the business?
- How many loyal (long-time) customers do you have? (You should check this out by looking at records.)
- How many long time vendors do you have? How often have they raised prices? Do you have alternative sources of supplies, inventory?
- Who knows you are selling?
If you have had experiences buying or selling a business, drop me a comment.