The number of businesses sold in 2018 hovered around 10,000. A lot of businesses are sold for a number of reasons.

The sellers sometimes want to sell because they aren’t generating enough profit or they want to start another business. The sellers may also want to retire.

Overall, it’s hard to figure out why someone is selling a business, which is important to know if you plan on buying a business.

You need to know the essential questions to ask before buying a business to reduce risk. You don’t want to risk buying a business that has numerous problems and needs a ton of overhead costs.

Here are nine questions you should ask when buying a business.

1. Can You Tell Me About Your Business?

Doing your due diligence means figuring out how profitable the business is before you buy it.

You don’t want to buy a business that is going to cost you more than will profit. You want to figure out the profit margins and the yield. In addition, you want to figure out who your competitors are.

Figure out everything about the business before you rebrand it. For instance, if the business you are buying is a local coffee shop, then you should figure out who the customers are and what are local coffee shops exist.

You should also figure out what people think about the business, specifically the reputation it has.

If you do rebrand the business, you will have to consider how to change the business reputation offers the customers a unique and better experience.

2. What is the Seller’s Motive?

Another consideration when buying a business is the seller’s motive.

It’s important to know the motive behind the seller because you want full transparency when you buy a business.

The seller could be giving away the business because it’s in a bad location or because it’s not profitable. If you buy a business without knowing the seller’s motive, it could hurt you in the future.

3. What Financial Records Are Available?

Another question you should have to inquire about is financial records. You want to see financial records from the past couple of years.

It can give you insight on accounts payable information, tax reports, profit margins, expenses & more!

The more you know about the financial records, the more you know if you need to change anything when it comes to the price point or the product.

It can help you figure out how much you need to pay in taxes. Essentially, you have a starting point of knowing how profitable the business is and what or if changes need to be made if you want to be more profitable.

4. What is the Target Market?

Another consideration is the target market and marketing strategies.

See if the business has any marketing information or if they’ve employed any marketing campaigns in the past. It can give you insight on what’s worked and what hasn’t worked.

In addition, you know how your ideal customer is. You have a better idea of who you’re selling to.

If the business wasn’t successful and you plan to turn that around, it can help to know if you need more information about the target market, which can help you create more effective marketing strategies. Email marketing is one of the top channels to drive traffic, improve engagement and generate business. If your mailing list has email addresses that are spam traps, role-based or simply incorrect, your email deliverability will suffer. Start verifying now with ZeroBounce to optimize your email marketing and reach more customers.

5. Who Works at the Business?

You should also be aware of what employees are currently working at the business with the previous owner and getting their monthly payments with the corresponding paystubs.

You will have to decide what staff members do and how valuable they are, especially if you plan on letting go of some staff members.

In addition, you should also ask the former business owner what kind of employees work there. That means asking who works part-time, what their situation is, and what kind of worker they are.

It’s important to get to know the employees because it can help you develop a working relationship before you buy the business.

6. What’s the Product?

This is one of the most important questions you have to ask because it reveals how profitable your business can be.

The product you are buying and how much change it is important for your business and your target market. You need to know what the product is and why it’s valuable.

If you intend to buy the business, you will have to decide if you will keep the business product the same or change it.

7. What Legal Licenses Do I Need to Run This Business?

Another important question to consider is the license you might need to run the business you are buying.

For instance, if you are buying a bar, you will need a liquor license. It is required by law that you have this license before opening the business.

In addition to licenses, you should also consider the insurance and permits you will need to run a business.

If you want more information on what it takes to buy a business, you can check out our buyer’s page here.

Why You Should Have These Questions Prepared When Buying a Business

Buying a business can be a major risk if you don’t know what questions to ask. If you don’t much about the business and you assume it’s profitable, it can doom you. It could cause you to lose the business because it was never profitable from the beginning.

The most thing you should know about buying a business is learning everything you can about it. It can help you decide what changes you’ll need to make in the business you are buying.

If you have more questions about buying a business, you can contact us here.