You’ve decided to buy a business but how do you know that the business you’ve chosen is the right one for you? Here are 7 questions every buyer should ask when they’re looking to buy a business.

1. Are The Numbers Provable?

One of the more frequent comments we get from buyers is that there are too many businesses where the seller cannot prove the numbers. So the strategy here is simple – if the seller cannot prove it, buyers will not pay for it, so only represent what can be documented. Additionally, if the seller has unreported income, do not expect to get paid for it. The benefit has already been realized.

The ability to provide buyers with detailed documentation to validate the financials is vital to a successful transaction. If the books and records are in disarray the seller should take time to organize them before taking the business to market.

2. Can It Be Financed?

Cash sales are rare. Serious buyers, however, do understand they have to put down a substantial down payment, but buyers want to utilize some financial leverage. There are three primary options for financing:

• Traditional lenders
• SBA loan program
• Seller financing

Traditional lenders rarely provide funds for acquisitions unless the loans are fully collateralized.

SBA type programs are growing in popularity. VR Huntington Business Group has established relationships with several SBA lenders and will pre-qualify the Seller’s business to determine the amount a qualified buyer may borrow. This greatly enhances the marketability of a business.

Seller financing is quite common and is addressed extensively amongst the various articles that have been posted on this site. Please read these articles as they offer valuable insight to this ever more popular means of securing financing.

3. What Does The Future Hold?


A business will almost always be sold that is valued upon past financial results, but the decision to buy will be based upon the future potential of the business. While some buyers consider growth to be their main criteria, at the very least the majority of buyers want to know that history will repeat itself. In other words, is the business sustainable and are there any issues that could impact it negatively after they buy. A realistic picture to the buyer should be presented, but at the same time the seller will want to present the business in a compelling fashion that demonstrates that all the parts are in place for them to takeover and continue to be successful.

4. Will Employees Remain?


This is especially important in businesses that may have some key employees. The buyer will more than likely want to meet them prior to closing. The seller should consider structuring the milestones of the deal to allow for the meeting.

5. If The Business Relies on Location Will the Lease Be Assigned?


Landlords can sometimes derail the sale. Consider meeting with the landlord to determine what issues will have to be addressed. A SBA loan will require that the business have a home for the term of the loan. Therefore, renewal options should be in place. To ensure that this doesn’t kill the sale, buyers should find out if their business broker is licensed to handle real estate transaction. For example, VR Huntington Business Group requires all staff members to have a real estate license to handle just such issues. In addition, we also have a Real Estate broker on staff to assist with the complexities of leases and landlords. If the seller owns the real estate and wishes to include it in the sale of the business then we will likewise guide you through this process.

6. Are there Any Hidden Problems?


The best strategy is to be upfront with prospects about any potential issues so that they can be dealt with early in order to maintain credibility and trust. When the seller wants to sell and the buyer wants to buy and the parties trust each other, it is almost impossible to prevent a successful transaction.

7. Is The Business Right For Me?


Ultimately, this is the question that is the make or break question. The buyer must make this decision, but the seller and his advisors should be of some assistance. VR Huntington will soon be releasing a proprietary program designed to answer this question. This program is in the beta stage now, but is called “Business Match Indicator”. The Business Match Indicator helps the buyer and seller to better understand the ideal profile and skill set of the perfect buyer for the business. This process helps the business intermediary conduct the pre-qualification screening of prospective purchasers.

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.