Questions to Ask Potential Buyers of Your Business
Selling a business means months of being questioned, but the questions you ask the buyer tell you whether the money is real and what becomes of the place afterwards. That holds whether you went to market or someone wants to buy your business and came to you first. The 56 questions here follow the order the conversations tend to run: who the buyer is, how the purchase is funded, price and terms, diligence, their plans for the staff and the name, and what is expected of you after close.
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The questions
Each question, and why to ask it
The buyer
Why this business, and why now?
Why ask it
The answer worth hearing names something specific: a customer list, a location, a licence, a market they already sell into. Talk of opportunities in the space often means yours is one of many businesses they have written to.
Are you buying this yourself, or on behalf of a fund or another company?
Why ask it
An individual buyer's timeline depends on their own nerve and credit. A fund answers to an investment committee you may never meet. Which one it is changes who you actually have to convince and how long it takes.
Do you already compete with us, supply us or buy from us?
Why ask it
A competitor learns your margins and your customer list just by going through the process, whether or not an offer ever arrives. That does not rule them out, but it changes how much you show them and when.
Will you sign a confidentiality agreement before I send anything, and who else will be bound by it?
Why ask it
Whoever you are talking to is rarely the only reader. Lenders, partners, accountants and a spouse may all see your accounts, so ask how the agreement covers them, and have your own lawyer say what it actually protects where you are.
Which other businesses have you bought, and can I call one of the people who sold to you?
Why ask it
A former seller can tell you whether the price in the offer was the price paid and whether the deferred money arrived on time. A buyer who has closed several deals and cannot produce one willing seller has told you something too.
How did you find out this business might be for sale?
Why ask it
If you never listed it, the answer tells you whether a broker, a supplier or one of your own staff has been talking. It also shows whether this is a considered approach or a letter that went to every owner in the trade directory.
Is a broker or finder involved on your side, and does anyone expect a fee from me?
Why ask it
Some approaches come from an intermediary who has no buyer yet and is really after a listing or a retainer. Get it in writing who pays whom before you hand anything over, and have your own adviser read any fee agreement before you sign it.
Have you run a business this size before, and in what trade?
Why ask it
Listen for whether they talk about operating or about owning. Someone who has actually run a company your size gets into staffing and seasonality. Someone who has only bought talks in multiples.
Who else has to approve this deal, and will I get to meet them?
Why ask it
If the person in front of you cannot say yes alone, everything you explain gets argued again later by someone who was not in the room. A business partner, a board, a lender and a spouse with money in the deal all count.
Are you looking at other businesses alongside this one?
Why ask it
Someone comparing three targets may be using your figures to benchmark the one they really want. Ask where you sit in their order, and judge their pace against the answer.
Funding
How much of the price is cash at close, and how much is seller financing or an earnout?
Why ask it
The split matters more than the headline number. An offer that is mostly earnout leaves you exposed to a business you no longer control, and the person deciding whether you hit the targets is the person who owes you the money.
Where is your financing now, and can you show me a commitment letter?
Why ask it
In discussions with a lender is not financing. Ask which stage they have reached: a first conversation, a pre-qualification (in the United States that is often for an SBA-backed loan) or a signed commitment with its conditions listed. Whoever holds the paper should be able to send it within days.
Can I see proof of the cash you are putting in yourself?
Why ask it
Lenders usually want a buyer to put in money of their own, and that slice is often the least certain part of the funding. A bank statement or a letter from their accountant is an ordinary request at this stage, and nobody serious takes it as an insult.
If I carry a note, what secures it, and will you guarantee it personally?
Why ask it
A seller note backed only by the company you just sold is backed by something the buyer now controls. Ask about security over assets, a personal guarantee and where you would rank behind the bank, then take the answers to your lawyer, since the rules on security differ by country and state.
What will your lender want from me?
Why ask it
Banks financing an acquisition sometimes require the seller to leave money in, accept delayed payments or stay on for a period. Better to hear those conditions from the buyer today than from a loan officer a week before closing.
How would an earnout be measured, and who keeps the books it is measured from?
Why ask it
Revenue is hard to argue about, while profit can be moved with a new salary or a management charge. Pin down the measure, the period, your right to see the figures and what happens if they sell the business before the earnout ends.
How much working capital are you keeping in reserve after close?
Why ask it
If all the cash they have goes into the purchase price, one slow quarter becomes a crisis, and if you are holding a seller note you feel that crisis too. Ask how the first payroll after close gets paid if a big customer pays late.
What happens to your funding if the lender values the business below our price?
Why ask it
A lender forms its own view of the business and lends against that, not against the number the two of you shook on. Whether the buyer would cover the gap or reopen the price tells you how firm the offer really is.
Price and terms
What valuation range are you working from, and how did you get there?
Why ask it
You learn which number they are anchoring on, earnings multiple, revenue, or asset value, and whether they have adjusted for what you pay yourself. A buyer who cannot show the arithmetic will rebuild it during diligence and come back asking for less.
Are you offering to buy the company itself or only its assets?
Why ask it
The two structures can leave you with different tax bills and different liabilities left in your hands, and buyers and sellers often prefer opposite ones. Find out which they intend before you compare offers, and have your accountant work out your net under each for where you are.
What exactly is in the price: stock, equipment, cash in the bank, money customers owe, the premises?
Why ask it
Two offers with the same headline figure can sit far apart once you see who keeps the receivables and the cash. Have them list what is included and what is excluded in writing.
Do you expect the price to be adjusted at closing for debt or working capital?
Why ask it
Offers are often made on the assumption of no debt and a normal level of working capital, with the final figure settled on closing day. Ask what they call normal and how it is calculated, because that definition is where a quiet reduction hides.
Are you asking me to keep a stake in the business, and what rights would come with it?
Why ask it
Funds in particular sometimes ask a seller to roll part of the price into shares of the new company. Those shares may be worth nothing until the business is sold again, so ask what say you would have, whether your share could be diluted and when you could cash it in.
Will you put the offer in a letter of intent, and which parts of it would bind us?
Why ask it
A letter of intent typically sets out price, structure and timetable without obliging either side to complete, while clauses such as exclusivity and confidentiality are often written to bind. Which is which depends on the wording and on the law where you are, so have your lawyer read it before you sign.
How long an exclusivity period do you want, and what do I get in return?
Why ask it
Exclusivity takes you off the market while they investigate, which is exactly when your bargaining position is weakest. Push for a short period with a date for each stage, and ask whether they would put down a deposit or cover your costs if they withdraw without cause.
What non-compete would you ask me to sign?
Why ask it
Get the length, the territory and the activities it would cover, especially if you plan to keep working in the trade. Whether such a clause can be enforced, and how wide it may be, varies by country and state, so have a local lawyer read it.
What warranties would you want from me, and how much of the price would be held back against them?
Why ask it
Money sitting in escrow or retained for a year or two is money you do not have yet. Ask the amount, the period, what counts as a claim and whether there is a cap on what they could come back for.
Which conditions in your offer could still let you walk away?
Why ask it
Subject to finance, subject to landlord consent, subject to board approval: each one is a door. Count them, then ask what would close each door and by what date.
Which parts of your offer are fixed, and which are open?
Why ask it
A buyer may be rigid on price and flexible on timing, the handover or what you get to keep. Knowing which lets you trade for what matters to you instead of arguing over the one thing they cannot move.
Diligence
What would you need to see in diligence before you would be comfortable signing?
Why ask it
Far better asked now than discovered in week six. The list tells you how much preparation is coming and whether they will want things you do not have, such as audited statements or margin broken out customer by customer.
Where will my documents be kept, and what happens to the copies if the deal ends?
Why ask it
A shared online folder can usually record who opened what and block downloads, which an email attachment cannot. Ask who sets it up, and get it in writing that copies are returned or deleted if they walk away.
How long did your last acquisition take from first conversation to close?
Why ask it
What they managed last time is a better guide than what they intend this time. A first-time buyer has no such record, so ask them instead how long their lender and their lawyer have told them to allow.
What timetable are you proposing, with dates?
Why ask it
A sale that drags distracts you, and a distracted owner produces weaker months just as the buyer is watching the figures. Dates for the offer, the end of diligence and closing give you something to hold them to.
How do you want to handle our largest customers, and would you contact any of them before close?
Why ask it
Customer contact before a deal closes can cost you the business if the deal then dies. Agree the rule now: no approach without you present, and nothing in writing to a customer until funds have moved.
When would you need to speak to my employees, and to which ones?
Why ask it
Buyers often want to meet a manager or two before committing, and that meeting ends the secrecy. Agree who, when and what they are told, and check with your adviser how employee details may be shared under the law where you are.
Which of our contracts and leases matter most to you, and what happens if one cannot be transferred?
Why ask it
Leases and supplier agreements often need landlord or vendor consent to assign, and waiting on that consent can hold up a closing. Hearing them raise assignment clauses unprompted is a sign they have been through this before.
Which licences, permits or approvals do you need before you can take over?
Why ask it
In a licensed trade the buyer may not be allowed to open the doors until a regulator has approved them, and neither of you controls that wait. Ask what they have applied for and how long it runs where you are, because your closing date hangs on it.
If diligence turns up something you did not expect, what do you do?
Why ask it
Some buyers raise the issue and ask for an explanation. Others arrive with a lower price and a deadline. Ask what happened the last time, which is a fairer guide than what they say they would do.
What is the smallest thing you have ever walked away from a deal over?
Why ask it
Their real dealbreakers are rarely the ones written in the term sheet. One buyer will say customer concentration, another undocumented cash, another a single unresolved claim. Whatever they name is what to prepare for.
What worries you most about this business?
Why ask it
Whatever they name is likely to be the lever they pull later to argue the price down. Hearing it now gives you time to fix it, document it or price it in yourself.
Staff and plans
What do you plan to do with the team in the first year?
Why ask it
Talk of looking for efficiencies often means cuts. If your staff matter to you, keep asking until they name roles, then ask whether any of it would be written into the agreement.
Will staff keep their current pay, hours and benefits?
Why ask it
In some countries employees transfer with their terms protected by law, and in others a buyer may rehire on new terms or not at all. Hear what this buyer intends, then ask your adviser how it works where you are before you promise your staff anything.
Which people do you think the business cannot lose, and how will you keep them?
Why ask it
Their list shows how well they understand where the work actually gets done. If the only name on it is yours, that is a problem for the handover and for any payment that depends on later results.
What would you change in the first ninety days?
Why ask it
The first three months are when staff and customers decide whether to stay. Changing prices, systems and suppliers all at once is a bigger gamble with your goodwill than watching for a quarter first, and if part of your price is deferred, the gamble is partly yours.
Will you keep the name, the premises and the suppliers?
Why ask it
A buyer folding you into a larger company may close the site and move the work, which matters to staff, to a landlord and sometimes to a whole town. If the name over the door is your family's, ask separately what rights to it they expect.
How will customers be told, and what do you want me to say to them?
Why ask it
Customers who learn of a sale from a rival's salesperson start shopping around. A joint letter or a round of visits with you beside the new owner is ordinary practice, and leaving it unplanned puts the goodwill they are paying for at risk.
Will you run it day to day, and if not, who will?
Why ask it
An owner-operator, a hired manager and a head office in another city are three different futures for the same business. If a manager is coming in, ask whether that person has been chosen and whether you can meet them.
What do you want this business to look like in five years, and would you sell it again?
Why ask it
This separates a steward from a flipper. Neither is wrong, but if you care what becomes of the place and the people in it, you should know which one you are handing it to.
After close
Do you want me to stay on after close, and for how long?
Why ask it
Their answer changes your own exit date. Buyers often assume months of your time and build it into the price without saying so. If you want to be gone the week after closing, that has to surface before you sign.
What does the handover look like week by week, and what are you expecting from me?
Why ask it
Get to hours, duration, whether it is paid, and what happens if it runs long. Warm assurances about being available become an argument three months after close when you are still taking calls at weekends.
If I stay, who do I report to and what can I still decide?
Why ask it
Going from owner to employee in your own building is harder than it sounds on the day you agree to it. Ask about title, authority over spending and hiring, and what happens to your pay and any earnout if they let you go early.
Once you own it, which changes could you make without my agreement while an earnout is running?
Why ask it
A new owner can raise costs, drop a product or merge your business into another, and each of those moves the figures your payment depends on. Have them name the decisions that would need your consent until the last payment is made.
What happens if a deferred payment is late?
Why ask it
Ask what the agreement would say about interest, a grace period and your right to demand the whole balance. A buyer who is comfortable with firm consequences is one who expects to pay on time.
What happens to the personal guarantees I have given for the business?
Why ask it
Owners often stand behind a lease, a bank facility or a supplier account in their own name. Unless you are released at closing, you may remain liable for a business you no longer run, so raise it early and ask your lawyer how the release can be made a condition of the sale.
If we disagree after closing, who settles it and how?
Why ask it
Arguments over closing accounts, warranty claims and earnout figures are the usual ones, and sale agreements normally name a process for them, such as an independent accountant for the numbers. Ask what they propose and have your lawyer say whether it is workable where you are.
Is there anything you would want from me once the handover ends?
Why ask it
References for customers, the odd phone call, your name on a licence until theirs comes through: small requests that are easy to agree to and hard to end. Put a date on each one.
Running the buyer conversations
Practical guidance for the conversation itself
When someone wants to buy your business and you were not selling
Find out who is really asking
A letter or a call saying someone wants to buy your business may come from the buyer, from a broker hunting for a listing, or from a firm that writes to every owner in a sector. Put the questions under The buyer before you share a single figure, and ask for the name of the party who would sign the cheque.
Let them name the first number
A buyer who approaches unprompted has usually done some arithmetic already. Ask for their range and how they reached it, then take it to an accountant or valuer of your own before you react to it.
One interested buyer is not a market
An approach tells you somebody is interested, not what the business would fetch if others knew it was available. Before you grant exclusivity, ask an adviser whether a quiet word with two or three other likely buyers is worth the delay.
Not yet is an answer
Nothing obliges you to move on the buyer's timetable. If your accounts are a year away from looking their best, say so, keep the contact, and agree a month to speak again.
Before you take the meeting
- Get a signed confidentiality agreement before any numbers change hands, including from brokers and advisers acting for the buyer.
- Ask for proof of funds or a lender letter before the second meeting. Serious buyers expect this; tourists disappear at this step, which is the point.
- Decide in advance what you will not discuss yet: customer names, individual salaries, supplier pricing, and any pending legal matter.
- Write down your own walk-away terms, price floor, maximum earnout, and latest acceptable exit date, before you hear an offer that flatters you.
Release information in stages
- 1Stage one: a short profile with revenue, earnings, headcount, and market, no names.
- 2Stage two, after an NDA and evidence of funding: three years of statements, customer concentration expressed as percentages rather than names, lease and contract summaries.
- 3Stage three, after a signed letter of intent with a firm price: full contracts, named customers, employee detail, and access to your systems.
- 4Keep a log of what you gave to whom and when. If a deal dies and a competitor later shows up with your pricing, that log is the only record you will have.
Reading the answers
- Specificity is the signal. A buyer who has done the work asks about your worst month, not your best year.
- Note who they talk about. A buyer who keeps coming back to your staff and customers is probably planning to operate. One who only asks about margin and multiples may be planning to resell.
- When an answer is vague, ask the same thing again with a number attached: how many weeks, how many people, how much cash.
- Compare what they say across meetings. Financing that changes shape between conversations is financing that does not exist yet.
Where sellers lose
Negotiating against yourself after the letter of intent
The price tends to get chipped at after the letter is signed, during diligence, once you have stopped talking to other buyers. Stay on good terms with the second-best buyer, as far as your exclusivity clause allows, until money has actually moved.
Treating the earnout as part of the price
Test the offer as if the earnout never arrives. If the deal only works when it does, talk that through with your adviser before you agree to it.
Letting the buyer talk to staff too early
Word travels faster than any deal. Agree exactly when and how employees are told, and who says it, before the buyer ever visits during working hours.
Answering everything yourself
Route legal and tax questions to your own lawyer and accountant, in writing. Off-the-cuff answers about liabilities or tax treatment can end up as statements you are asked to stand behind in the sale agreement.