Questions to ask before you buy a small business
The listing answers the easy questions. These are the ones that change the price, or end the deal.
Who actually buys from this business?
Ask what share of revenue sits with the largest customers, and whether any contract is about to end. A business with forty customers is a different risk from a business with one customer that is half the revenue. Ask for a customer list that shows the concentration. If they will not show it after an NDA, treat that as the answer.
What does the owner do all day?
Ask which tasks stop if the owner leaves on Monday. If the owner is the salesperson, the estimator, and the person the key supplier will talk to, you are buying a job. Ask who else can do each task, and whether that person is staying.
Do the earnings match the tax return?
Ask for three years of returns and a profit and loss that ties to them. A profit and loss that does not tie to the return is not a number you can borrow against. Add-backs need the same treatment: each one should point at a line you can see.
Can you keep the location?
Ask whether the lease can be assigned, and what it costs to renew. A business that depends on its corner is worth less if the landlord can refuse the transfer or reset the rent. Read the lease, or have someone who reads leases do it, before you agree to a price.
What is already public?
Look up the registration, liens, and lawsuits before you treat the seller's packet as complete. Public records do not replace diligence. They tell you what a searcher can see without the seller's permission. BizFacts is a lookup of that public record. Not satisfied? Get a full refund, or use your payment as credit to look up a different business.
Start at BizFacts. The longer list of checks is the diligence checklist.
BizFacts lets you look up a business before you rely on the seller's packet. Search is the first step.
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Common questions
Should I ask these questions before the NDA?
Ask the ones the public listing can answer. Customer names, tax returns, and the lease come after the NDA.
Is a public-record lookup the same as an appraisal?
No. It is a search of records. It does not tell you what to pay.
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