Excerpted from Diomo.com, by permission:
Meeting with sellers is a crucial step in the business buying process. It is so important that you ask good questions. If not, you will waste time, miss out on good opportunities, or overlook a critical aspect of the business that can haunt you later.
Keep in mind that sellers may have very rehearsed answers and so you need to mix up your questions, take great notes, and look for any hesitation when they reply.
If the seller has an intermediary, (broker), present, your questions and conversations should be directed towards the seller – he/she needs to own the answers to your questions.
There are at least 36 key questions you must ask every seller. Here are a few of them:
• Provide me with an overview of the company from the day you started until today – what have been the successes and failures?
• What do you do everyday?
• Do you anticipate any problems with me getting credit from your suppliers
• Do any of your customers or suppliers represent more than 10% of your business? If yes, who are they?
• Why are you selling?
• What is it that you like best and least about the business?
• How did you arrive at your asking price?
• If you get hit by a cement truck today, who would run the business tomorrow?
• Do your employees know the business is for sale?
• What is the ideal profile of the ideal buyer for this business?
• What can be done to build the business?
• How long will it take me to really learn this business?
• How long can I count on you to train me after the sale?
• What keeps you up at night about the business?
• What are the details of the lease? How long? Any options? Do you anticipate any problems with the landlord assigning it to me or entering into a new lease?
• How much vacation do you take (not that you’re looking for time off…rather, you want to know if they have adequate staff that will allow you time away)
• Are you the only owner?
• Who are the key employees? Any manager in place? Are there any employees that are critical to the business?
• Are you willing to finance part of the purchase? If not, why?
Answers and Research
You want to get enough answers and detail to your questions so you can immediately focus on researching the business, the industry, the competition, etc. Although the Internet allows prospective business buyers to do phenomenal research and quickly, in today’s environment, good businesses sell fast – very fast. As such, you may not have a lot of time between a seller meeting and preparing an offer. Obviously, you’ll want to do your homework before moving to an offer so be sure to get enough information in your seller meeting to conduct your research. On this note, always ask the seller if he/she has copies of any trade publications. They’re a great source for additional information.
Seeing Yourself in The Business
If you take away anything from a seller meeting, it should be the answer to these four questions:
1. Do I like the business?
2. Can I see myself running it?
3. Do I like the seller?
4. Do I trust them?
Questions 1 and 2 are obvious. Questions 3 and 4 are critical. If you like the seller and trust them, chances are you and they will be able to work through any and all of the deal challenges that will arise. Trust is also paramount. If not, you will always keep thinking they are hiding something.
Impress The Seller
If you have any chance of getting the seller to finance the deal, or bend more they would normally on the deal terms, you need to leave them feeling that “you’re the one” to buy their business. If they believe that you can not only get the deal done, but also run the business successfully, they will go out of their way to make the deal happen.
So there you have it: a series of key questions to ask the seller, and the key points to focus on as your goal when you meet them. Good luck!