Questions to ask when buying business

Buying a business can be a real power move. Just look at how legends like Elon Musk (Tesla) and Howard Schultz (Starbucks) took someone else’s vision and turned it into a global empire.

However, as a business owner, you can't just jump on the first 'dream opportunity' that pops up. You need to know the risks, the flaws, and then, and only then, can you decide if you’re ready to transform someone else’s foundations into your own triumph.

That’s why we’ve compiled a no-nonsense list of tough questions you must ask, both of the current owner and yourself, before making your move (Try some of our small business tips to roadmap your way up the business ladder!).

Personal questions for yourself

It’s easy to get swept up in the excitement of a new business venture. Before meeting the business owner, make sure you do your homework and have a clear head going into the negotiations. The questions below will help make sure you have the right mindset to decide whether or not you should be buying a business:

Why exactly do I want to buy this business?

If you don’t know why you want to buy a business, stop right now. This isn’t some casual investment. It’s a life-altering commitment. The moment you step into this business acquisition process, you’re signing up to take on every piece of this existing business, from its balance sheets to its business culture, its financial health and its customer loyalty.

So, why this business exactly? Is it the annual gross revenue? The key customers? The marketing methods? Or are you chasing the idea of being your own boss without fully understanding the weight of the responsibility?

Your reason for buying this business must be grounded in more than ambition. It needs strategy. Because when the excitement wears off, the why will be what sustains you.

Why do I want to buy this business instead of just starting my own?

Starting your own business is seductive. It’s the clean slate, the blank canvas where every decision is yours to make. Although, no matter how brilliant your idea is, you’re still starting at zero. That means no customers, no revenue, no established reputation.

Buying an existing business, on the other hand, gives you a head start. But let’s not romanticize it. It should be a calculated move. You’re buying more than a company’s business assets or annual profits. You’re inheriting the decisions of your predecessor, along with the customers, market presence, and (for better or worse) its reputation.

The question you have to answer is, can you take what exists and make it better? There are pros and cons to both starting a business from scratch and buying an already existing business. It’s important to weigh the two options and see which one seems like it would work best for you. 

Who else should I speak to after meeting the seller?

It might feel like you’ve ticked a major box once you've met the current business owner, but one perspective won’t give you the full picture. To truly understand the business you’re about to invest in, you need to step into the trenches and talk to the people who make it run every single day.

Speak to all of the employees. They're the people who know the day-to-day operations better than anyone. Find out if they're motivated. Are they bought into the company culture and mission?

Next, connect with the customers. What do they think of the service or products on offer? Are they loyal to the brand or just sticking around out of convenience?

Am I prepared for the responsibilities of owning this business?

According to the U.S. Small Business Administration, there are approximately 33.1 million small businesses in the United States alone. Yet, despite their prevalence, the harsh reality is that nearly 20% of small businesses close their doors within the first two years. After 5 years, that number rises to 45%.

Being ready for the responsibility of business ownership requires a mindset shift. It demands a level of preparation, grit, and leadership that cannot be overstated. A business is a long-term investment in your time, energy, and emotional capital. Are you truly ready for that?

Now, if you're nodding along to this in agreement, then you're on the right track. But if there’s hesitation, you'll need to do the hard work of self-reflection. What strengths do you bring to the table? Where do you need help? Being honest about your skills, identifying where you need support, and building a strong team around you is the first step in prepping yourself to take on the monumental responsibility of owning and running a business.

What are my long-term goals, and how does this business fit into them?

According to Truist’s recent Small Business Pulse Survey, over half (65%) of small business owners do not have a formal growth strategy in place. So, if you're considering buying a business, you need to be asking yourself how this business fits into your long-term vision.

To do this, you need to start with clarity. Clarity about your goals. Clarity about your desired impact. Clarity about the legacy you hope to build. Your reason for acquiring this business can’t be a knee-jerk reaction to a great deal or the allure of a quick payoff.

This is where goal-setting becomes essential. As Tony Robbins, author and coach, wisely says, “Setting goals is the first step in turning the invisible into the visible.”

Personal questions for the seller

So you've done the self-reflection and are now ready to go ahead with the business purchase. But, here's where you start the due diligence process and speak to the person who's selling you the company. Ask him or her:

Why are you selling the business?

The answer to this question can reveal more about the true health of the business than any financial statements (like cash flow statements) or spreadsheets ever could.

If the seller can’t give you a clear, rational answer, walk away. Similarly, if they’re selling because they’ve hit a wall or because the business is sinking, that’s a warning sign no new owner can ignore.

So what are some green flags in answers to this question? If the seller shares a story of evolution and growth, it speaks volumes. Maybe they’ve taken the business as far as they can, and now they’re ready for the next chapter.

How long have you owned the business?

Now this one's important. That's because the length of time that the current owner has owned the business will reveal a lot about the company.

Longevity is a great indicator of the future success of the business.

How much of the business’ success do you attribute to personal loyalty rather than business loyalty?

When the seller exits, will customers stay, or will their loyalty leave with them? A business reliant on personal ties risks collapsing once those ties are gone.

In contrast, business loyalty (built on the brand, consistent quality, and exceptional service) is transferable and scalable. This is the kind of loyalty that endures, regardless of who’s in charge.

How much do you currently pay yourself?

A straightforward answer can reveal a lot here. Are they paying themselves a generous salary because the business is thriving, or are they scraping by, indicating potential cash flow issues? On the other hand, a low salary might suggest reinvestment into the company or strategic restraint for growth. You cannot afford to shy away from this conversation. The owner’s salary is a window into the profitability and priorities of the entire operation.

What challenges have you faced in the business, and how did you overcome them?

When it comes to running a business, you've got your successes and then you've got your struggles. This question is your opportunity to hear them both.

Challenges are inevitable. Just look at the last few years we've had. A global pandemic, supply chain disruptions, a cost of living crisis that left people shopping less and saving their cents.

What matters is not that the challenges existed, but how they were met. A thoughtful response shows problem-solving skills, adaptability, and, most importantly, the strength of the business model. But, if the struggles seem to linger or repeat, you might be stepping into a pattern of unresolved issues.

What do you see as the future potential of this business?

If the seller can’t come up with a clear, compelling vision for the future, that’s a problem. It suggests that they’ve either hit a ceiling or haven’t thought deeply about what’s next.

Vague ideas like “it has a lot of potential” aren’t enough, you need to know exactly where that potential lies and how realistic it is to achieve. The right answer should highlight untapped opportunities like new markets, innovative products, or attracting more profitable clients.

Personal questions for the seller

So you've done the self-reflection and are now ready to go ahead with the business purchase. But, here's where you start the due diligence process and speak to the person who's selling you the company. Ask him or her:

Why are you selling the business?

The answer to this question can reveal more about the true health of the business than any financial statements (like cash flow statements) or spreadsheets ever could.

If the seller can’t give you a clear, rational answer, walk away. Similarly, if they’re selling because they’ve hit a wall or because the business is sinking, that’s a warning sign no new owner can ignore.

So what are some green flags in answers to this question? If the seller shares a story of evolution and growth, it speaks volumes. Maybe they’ve taken the business as far as they can, and now they’re ready for the next chapter.

How long have you owned the business?

Now this one's important. That's because the length of time that the current owner has owned the business will reveal a lot about the company.

Longevity is a great indicator of the future success of the business.

How much of the business’ success do you attribute to personal loyalty rather than business loyalty?

When the seller exits, will customers stay, or will their loyalty leave with them? A business reliant on personal ties risks collapsing once those ties are gone.

In contrast, business loyalty (built on the brand, consistent quality, and exceptional service) is transferable and scalable. This is the kind of loyalty that endures, regardless of who’s in charge.

How much do you currently pay yourself?

A straightforward answer can reveal a lot here. Are they paying themselves a generous salary because the business is thriving, or are they scraping by, indicating potential cash flow issues? On the other hand, a low salary might suggest reinvestment into the company or strategic restraint for growth. You cannot afford to shy away from this conversation. The owner’s salary is a window into the profitability and priorities of the entire operation.

What challenges have you faced in the business, and how did you overcome them?

When it comes to running a business, you've got your successes and then you've got your struggles. This question is your opportunity to hear them both.

Challenges are inevitable. Just look at the last few years we've had. A global pandemic, supply chain disruptions, a cost of living crisis that left people shopping less and saving their cents.

What matters is not that the challenges existed, but how they were met. A thoughtful response shows problem-solving skills, adaptability, and, most importantly, the strength of the business model. But, if the struggles seem to linger or repeat, you might be stepping into a pattern of unresolved issues.

What do you see as the future potential of this business?

If the seller can’t come up with a clear, compelling vision for the future, that’s a problem. It suggests that they’ve either hit a ceiling or haven’t thought deeply about what’s next.

Vague ideas like “it has a lot of potential” aren’t enough, you need to know exactly where that potential lies and how realistic it is to achieve. The right answer should highlight untapped opportunities like new markets, innovative products, or attracting more profitable clients.

Questions about the asking price

When buying a business, the current owner’s price and your ideal price will rarely align. That’s why asking the right questions is essential, such as:

What is the yearly gross revenue and profit margin?

An honest seller will not hesitate to show you the exact figures regarding the profit margin (how much profit your business makes). You’ll want to know how much you can earn from this business, as well as what the current overheads are. 

How healthy are the books?

Don’t take the seller’s word for it. Scrutinize the past three to five years of financial statements, tax returns, tax records, balance sheets, and anything else that will give you an honest picture of the business's financial health. If you don’t have an accountant or financial advisor on your team for this, get one!

Has your asking price been appraised by an external auditor?

If the previous owner has an independent appraisal and it’s significantly different from their asking price, you need to dig a bit deeper. The seller may have inflated the target business price based on personal value or emotion, which means you’ll have to work through those discrepancies.

We recommend getting an appraised business valuation from a neutral third party like an independent auditor that'll give you a far more realistic picture.

What liabilities are attached to the business?

If there are any outstanding debts or liabilities tied to the business (whether it’s loans, mortgages, or long-term contracts) you need to know upfront.

The owner should disclose this without hesitation. Don’t assume the business is clean. Instead, find out if there are any skeletons in the closet before you sign on the dotted line.

What assets come with the business?

This includes tangible assets like delivery trucks, equipment, and inventory, as well as intangible assets such as goodwill, intellectual property, and social media presence. If they fail to provide a detailed list of what’s included, you might be getting less than what you’re paying for.

What is your goodwill valuation of the business?

The goodwill value is essentially the purchase price someone is willing to pay above the hard assets, based on things like reputation, brand strength, and intellectual property. A business with strong goodwill valuation can command a higher asking price, but you need to assess whether that value is real or simply a seller’s wishful thinking by carrying out some investment analysis.

How did you arrive at your asking price? 

Was it based on hard facts, like financial performance, assets, and market conditions? Or is it influenced by emotions and personal values? If the seller has a solid, logical explanation that aligns with a realistic business valuation, great. But if their justification feels flimsy or doesn’t match the numbers, that’s a major red flag.

Are there any hidden costs I should be aware of? 

Every business has its nuances, and not all costs are immediately apparent. Some hidden costs can be deal breakers if you don’t ask the right questions. Is there deferred maintenance, aging equipment that needs replacement, or ongoing legal issues that might come to light after the sale? What about vendor agreements, contracts that lock you into certain terms, or client promises that may not be sustainable?

Questions about business operations 

Listen, you can have a great product, a solid brand, and a vision for success, but if the day-to-day operations are a mess, you’re setting yourself up for failure. This is where too many entrepreneurs fail to ask the tough questions. Questions like:

What does your current business plan look like? 

If the seller can’t articulate a clear vision for future growth, what does that tell you about their commitment to the business? It’s not enough to have a vague “we’ll grow over time” approach. This is about strategy, tangible steps, measurable milestones, and foresight into what’s next.

Who are the key employees, and what roles do they play? 

Good employees can add an incredible amount of value to a business. If you’re planning on replacing some existing employees, remember that they likely have years of experience in that company that you don’t, so their knowledge and understanding of the operation is not something to underestimate.

How does the day-to-day operation of the business run?

If the owner can't clearly explain the daily operations of the business, it’s an indication that they’ve never taken the time to put those systems in place. A well-run business has clear, defined procedures for every part of the operation. Listen out for clear structure, policies and procedures, efficiency-boosting ideas.

Are there any systems or software in place to help manage the business?

When you ask this question, You're not asking about their “tech stack” for the sake of it. You're asking because you want to know if the business has the tools to run efficiently and scale smoothly, or if you’ll be spending the next few years manually fixing inefficiencies.

You should be hearing responses like, “We use a POS system that seamlessly integrates with inventory management and payment processing,” or “Our CRM handles customer relationships while syncing with our email marketing platform.” That’s the gold standard. If they tell you they’re still running on spreadsheets and disjointed software that doesn’t communicate, take note.

You also need to ask how reliable are the existing processes and operations in place? Are the systems in place working as expected, or do they break down under pressure? Have they experienced any downtime and loss of sales as a result?

What are the main operational challenges you face?

Every business has its pain points, and you need to know where they’re lurking before you sign on the dotted line. What are the roadblocks that have prevented growth? Is it a supply chain that’s prone to delays? Or perhaps an operational bottleneck that causes production slowdowns? Whatever it is, you want to know how these challenges are affecting the day-to-day.

Are there any ongoing or potential issues with suppliers or contractors?

Supply chain challenges remain relentless, with 90% of leaders encountering disruptions in 2024, according to a McKinsey survey. The reality is, supply chain and contractor issues may not show their true impact immediately, but when they do, the results are often catastrophic.

It’s one thing for a business to tell you, “We’ve got great relationships with all our suppliers.” It’s another to hear that those relationships are built on trust, sales performance metrics, and mutual contingency planning.

Legal and compliance questions

Now onto the questions you need to ask about the legal obligations:

Does the business have any previous or pending lawsuits? 

Inheriting legal trouble is one of the most dangerous missteps a buyer can make. If the business you're considering has a history of lawsuits (or worse, pending litigation) it can have significant financial consequences. But don't just take our word for it, a Gowling report found that companies saw an average 5% drop in share price upon the announcement of litigation, an immediate and painful financial hit.

What permits and licenses will I need to renew or acquire? 

Most businesses have some sort of licensing specific to their industry. Asking the current owner about this will save you a significant amount of time and possible legal trouble down the line. 

Is the business compliant with local, state, and federal regulations?

Say you’re acquiring a restaurant. In this case, legal compliance with health and safety codes, food handling regulations, and labor laws is non-negotiable. In retail, it’s no different, product safety, employee wages, and zoning laws are all crucial. Failing to stay on top of local, state, and federal regulations can have serious consequences. We're talking about costly fines, lawsuits, or even a shutdown.

Are there intellectual property rights or trademarks associated with the business?

When asking about intellectual property (IP) rights or trademarks, you're essentially asking whether the business owns valuable assets that protect its brand, products, or unique processes.

Trademarks, for example, protect a business's brand identity (its name, logo, or slogan) from being used by competitors. If you're acquiring a business with a strong, recognizable brand, the trademark can be a valuable asset that carries goodwill and customer loyalty.

Are there employee contracts, union agreements, or ongoing disputes to consider?

Maybe there are key employees you can’t easily let go, or perhaps there are contractual obligations that limit your ability to make changes. This matters, especially when it comes to talent retention, which is critical in any business’s success.

Now, if the business has union agreements, that introduces another layer of complexity. Unions bring stability in some ways but can also introduce potential challenges in negotiations, pay scales, benefits, and working conditions.

Does the business have the necessary insurance coverage?

What are we talking about here? First, you’ve got general liability insurance, which covers common risks like accidents, injuries, or property damage.

Then, depending on the industry, there’s likely workers' compensation insurance for employee-related injuries and property insurance to cover damages to physical assets.

You'll need to know the full scope of the business’s coverage. If they’re cutting corners on insurance, it can signal negligence or, equally bad, a lack of awareness about the risks involved.

Transition and financing questions for a smooth sale

Stepping into an existing business is far from automatic. It’s a transition, not a transaction. Here are some questions you'll need to know before transitioning:

What is your preferred method of sale financing? 

The way the deal is financed can dictate the structure of your relationship with the current owner, the timeline of the transaction, and even the risk you’re assuming.

Are they open to seller financing, where they carry part of the loan? Is it an all-cash deal? Or are they open to structured payments based on the performance of the business post-sale?

You need to know what you’re walking into financially before you even consider the numbers. As Warren Buffett famously said, “Price is what you pay. Value is what you get.” So make sure you understand the full picture.

Do you have a plan for the business transition after the sale?

A smooth handover is non-negotiable. Without a clear plan in place, you’re setting yourself up for an uncertain and potentially rocky start.

No one wants to inherit a mess of operational confusion or a disillusioned team.

What support will you provide during the handover period?

You want to know if the seller is willing to stick around for a while to ensure the continuity of the business.

Are they offering a mentoring period where they help you navigate the initial stages of ownership? Will they be available for questions or offer guidance on critical decisions?

The seller’s support during this period can be the difference between smooth sailing and a full-blown crisis.

Are there any specific training or mentoring arrangements in place?

If the seller is offering a comprehensive training program, it’s a great sign that they want the business to succeed under your leadership. 

However, if the seller is vague or dismissive about this, it could suggest that they’re simply cashing out and leaving you to figure everything out on your own.

Questions to secure the future of your business

Now onto all things scaling:

What untapped opportunities exist for growth in this business?

This could be in the form of entering new markets, launching additional products or services, or leveraging existing relationships in new ways. Is there a customer segment you’re not reaching? Are there digital channels, partnerships, or geographical regions you haven’t fully explored? The key here is to find areas with high potential for impact and low resistance to entry.

How can I scale this business moving forward?

It’s easy to get caught up in the hustle and think that growth means simply doing more, but scaling is about smart, sustainable growth. You need to ask yourself, what’s the heart of this business? Is it your unique product? Your customer service? Maybe it’s the team you’ve built. Whatever it is, you have to double down on that.

What marketing strategies are currently in place, and how effective are they?

If you can’t measure your marketing efforts, you're essentially throwing spaghetti at the wall and hoping something sticks. We live in an age of data. If your marketing is not measurable and results-driven, then it’s probably just noise. You shouldn't care how many followers they have on Instagram or how pretty their website looks. If those numbers don’t convert into leads, sales, or customer loyalty, you’ve got a problem.

Are there long-term customer or supplier contracts that offer stability?

Long-term contracts can be a blessing or a curse. Yes, they offer stability. Yes, they lock in customers and suppliers, which can provide predictable revenue. But are these relationships healthy, or are you just locked into outdated terms because no one had a proactive mindset or the guts to renegotiate?

Warning signs when buying a business

Finally, these are the questions you need to ask will determine whether you're acquiring a thriving opportunity or stepping into a ticking time bomb:

What are the common signs of an overvalued business?

If a business is being sold based on inflated projections, not grounded in historical performance, you’re walking into a trap. A business with inconsistent profitability, questionable scalability, and a reliance on the current business owner is not worth the premium price.

Are there discrepancies in the financial records or sales history?

Financial records should be airtight. You need to understand where every dollar is coming from, how it's being spent, and if the business is truly as profitable as it claims. If a seller is evasive about explaining inconsistencies in their company's finances or doesn't have an explanation for discrepancies, that’s a clear sign they’re either hiding something or lack proper financial management.

Does the business rely heavily on one customer or supplier?

If you've ever heard the saying "don't put all your eggs in one basket," you'll understand why this is a good question to ask before committing. A single customer could pull out at any moment, or a supplier could increase prices or just stop delivering altogether, and suddenly your business is left scrambling. The risk here is profound, too much dependence on one entity can undermine the stability of your revenue and operations.

What are the risks associated with high employee turnover or low morale?

Studies have shown that replacing an employee can cost upwards of 30% to 50% of their annual salary, and that’s not even accounting for the lost institutional knowledge and disrupted workflow. On top of this, you've got to think about the impact on the team left behind. Low morale breeds disengagement, poor customer service, and a toxic culture that drives away top talent. It’s a vicious cycle. Are you ready to invest the energy and resources it will take to rebuild trust, renew engagement, and restore stability?