10 Questions to ask when buying a Business  

In this blog, SOT Business Brokers Perth has compiled 10 questions to ask before you purchase a business.

1. What is the reason for the sale?

Understanding why the business is being sold can provide insights into its current state and potential risks or opportunities. Generally a seller is looking to retire or has had a change in life circumstances. Ask questions about the reason for the business sale so you fully understand the sellers motivation.

2. What is the financial health of the business?

Analysing the financial statements, profit margins, cash flow, and debt can help assess the business's stability and profitability and if it fits in with your business knowhow. This is something you’ll need a good handle on when you’re running the business. If you can understand the financials of a business, speak to your business broker or accountant. If you still don’t understand, this business might not be for you.

3. What is the customer base like?

Understanding customer demographics, loyalty, and satisfaction levels can help gauge the potential for growth and sustainability of a business. In any business you need to understand your customers. What drives your customers, is what will drive your business. Know your customers and why they transact with this business.

4. What is the competitive landscape?

Identifying competitors, their market share, and their strategies can help evaluate the business's position and potential for success and growth. Is this business bottom of the pile with room for improvement, or top of pile with clear runway ahead? Know where the business is relative to the competitive landscape so you understand if it’s a fixer upper or a business that’s ready to scale – it takes different skill sets to run each type.

5. What is the condition of the physical assets?

Assessing the state and value of the business's equipment, machinery, real estate, or inventory can help determine any additional investments required. You don’t want a big bill for replacing machinery or other assets day one, so test the gear. Also, check if anything is under warranty so you know where to look first in case of a breakdown.

6. Are there any legal or regulatory issues?

Investigating licenses, permits, contracts, or any potential legal liabilities can minimise future risks and unexpected expenses.

7. What is the reputation of the business?

Researching customer reviews, online presence, and industry reputation can shed light on how the business is perceived and its potential for growth. Unsatisfied customers tend to talk louder, so it’s easy to find where the minor (or major!) problems in the business operations are. Check Google and social media for reviews.

8. What is the current management/staff team like?

Evaluating the skills, experience, and tenure of key employees can indicate the business's ability to sustain operations and adapt to changes. This also represents one of the bigger risks in a change of ownership. Make sure you spend the time getting to know the team once you take over a business.

9. What are the growth prospects and market trends?

Analysing the industry's growth potential, market demand, and emerging trends can provide insights into future opportunities and risks. Try to understand the upside your buying into as much as possible and plan for how to take advantage of the potential in the business. It’s nice to buy a business and improve it as much as possible as quickly as possible!

10. What are the operational processes and systems in place?

Understanding the efficiency of existing processes, technologies, and systems can help identify areas for improvement and potential cost savings and in turn, increase the profitability of the business.

These questions provide a comprehensive understanding of the business's current state, potential risks, and growth opportunities, enabling you to make an informed decision when buying a business. SOT business brokers aim to provide buyers with as much information as possible so that they can make detailed and informed decisions when buying a business.

If at any point in the buying process, you feel as though you need more information, please never hesitate to ask. SOT Business Brokers Perth will do all they can to ensure you have the information required to make the right decision for you.

Business Brokers That Can Help You!

Looking to buy a business for sale in Perth? SOT business brokers in Perth are familiar with every aspect of the Perth business sales market.

SOT Business Brokers Perth provide experienced and knowledgeable services to ensure the Perth business sales process is as quick and simple as possible. 

SOT can also help expand your business. SOT’s wide network and in-depth understanding of the Perth business market can better position your business for success.