Some time back, we took a high level view of the types of questions that buyers in a transaction should consider asking sellers. We looked at questions like “why are you selling?” to “what will you (the seller) do next?” To complement those more cerebral questions, we’re adding a list of more specific questions that get right into the heart of operating any given business.
Describe an ideal buyer of this business.
Don’t think of this like an anxious single person would when asking “what’s your type” of their date. You don’t need to tick every single box in the answer to this question, but you probably do need to tick many of them. Also, don’t let fear swallow important follow-ups. If the seller says that this is ideal for someone who wants to grow a large business, and you were thinking about more about buying a lifestyle business, ask them, “Do you think this is a good lifestyle business?”
Discuss the strengths and weaknesses of the local competition.
All good entrepreneurs know who their competition is. This is a chance for honest disclosure, not chest-beating. It’s also important to find out if the seller has any relationships with any of the competitors. The saying “keep your friends close but your enemies closer” has some resonance in business. Your competitors are monitoring the same things that you are, and information sharing that doesn’t include important business secrets, is a healthy part of directing and managing any business.
Can you tell me the demographics of the core customer?
Savvy business-owners can recite this without reference to additional materials. What’s important is to follow-up with the limits. If the core demo is 25-45, ask about why not under 25 and why not over 45, and/or if there are other products and services that appeal to those groups. This will show the buyer you’re thinking from a bigger perspective and also give you some important insights into the business.
Who is the most important employee and why?
As we discussed in a previous article, it’s important to have a collaborative attitude with employees. Often a key employee isn’t just extremely valuable to the owner and the business, he/she can be the glue that holds other employees in orbit as well. Lose that person, and you may lose others as collateral damage. Find out why this person is special and seek to preserve that relationship.
What was the one thing you never did that you think I should do?
Business owners have so much going on when they start their businesses that there are often projects and ideas they were never able to execute. So much is invested in hiring good people, putting together systems, and getting customers, that sometimes the stuff “I’ll get to one day” never gets gotten to. Why not ask? They might give you the starting point of the next great chapter of their company, the first with you in charge.
Who are the best and worst vendors?
Vendor relationships are key, and while you may have your own people you will want to use when you take over, it’s important to understand the history of who the company has dealt with in the past and why those relationships have been successful (or unsuccessful). As with all these other questions, ask them in a positive and open way, seeking clarity and information. Take note of any reservations or poor reactions, but even then, try to gently follow-up. What you want is information, not accusation.
Want more questions? We’ve got boatloads of them to assist you in your transaction. Give us a call to find out more today.