Considering Buying a Business? Ask These 9 Preliminary Questions To Begin

Posted by Jennifer M. Settles, Esq.Jun 24, 20230 Comments

Are you considering buying a business?     As a prospective purchaser, it's wise to ask a lot of questions of the seller early on in the discussions.   By asking the right questions early, a prospective purchaser can gain critical insights about whether the transaction could be a good fit, and whether to pursue next steps.    

Asking the right questions in a potential M&A transaction empowers the prospective purchaser to gather crucial information, assess risks and value, identify opportunities, build relationships, and mitigate potential surprises.  By posing the questions in an open-ended manner, there is a high likelihood that the questions will lead to further robust discussions, potentially opening up new lines of questions and areas for focus.

9 Preliminary Questions A Prospective Purchaser Can Ask A Seller

The following is a list of nine preliminary questions that a prospective purchaser can ask a seller.   Although some of the items below may seem somewhat "personal", they are fair questions to pose.  Once the initial rapport has been developed among the parties, its wise for a buyer to raise these questions early, before expending significant resources and doing a deeper dive into due diligence.      

1.  How Was The Asking Price Determined

How did the seller arrive at its asking price?   The goal of this line of questions is to shed light on whether the asking price is based on the company's prior financial performance, industry and market comparisons, projections or other valuation methods.   It's also relevant to ask whether the seller engaged professional assistance, such as a broker or appraiser, in setting the asking price.   These questions will help the purchaser understand the seller's perspective, including whether emotional considerations or unique circumstances were involved in setting the asking price, which itself can lead to further questions and information.  Additionally, having this information is necessary in formulating a counteroffer, if applicable.  

2.  Why Are You Selling

It's important to learn why the seller is seeking to sell the business at this time.   This question can lead to pertinent insights relevant to the industry, the business itself, and its ownership.  This question can lead to further topics, such as inquiring what the seller will do if he or she is unable to sell the business - information which can lead to greater bargaining power for the buyer in the deal negotiations.    These questions may also lead to topics such as whether the seller is exiting the industry and would be willing to execute a noncompete agreement upon the closing; and the extent to which the seller would provide transition assistance upon the closing. 

3.  Financial And Tax Information

A prospective buyer will want to ask about the seller's financial statements.   What types of financial statements does the seller maintain?   Are the financial statements audited, reviewed, or internally-prepared?  Will the seller provide three years of financial statements and tax returns? These questions will be informative as to the seller's prior results of operations, seriousness towards the transaction, and the seller's degree of corporate formality, organization and record-keeping in respect of its business.

4. Time Commitment and Skill Set

What is the time commitment and skill set needed to run the business? How much time do the key principals spend in running the business?  Does the business substantially run on auto pilot with existing electronic tools, or is a more hands-on approach needed?  What key skills are needed to run the business?   These are fundamental questions to determine if the prospective purchaser and seller are in alignment. 

5.  Employees/Contractors

Who are the employees and contractors of the business; what are their roles, and will they stay on after the sale of the business or will they depart?  How critical are certain people to the ongoing success of the business?   Understanding these issues is crucial for understanding the potential staffing needs of the organization. 

6.  Challenges

What are the seller's greatest challenges at present?   What challenges lie ahead?  What would the seller have done differently, in retrospect?   These questions can provide insights into the business and may potentially serve to limit surprises later.  By asking these questions, the buyer may gain insights into identifying opportunities for future scaling of the business.  

7.  Legal And Regulatory Issues

It is wise to inquire early about legal and regulatory issues that the business faces, past or present, such as pending or threatened litigation, prior settlements, warranty matters, tax audits, environmental conditions, employment disputes, contract disputes, and more.     Also, the prospective purchaser might ask whether any special licenses, permits or approvals are needed to operate the business. 

8.  Customer And Supplier Base

It's important to inquire about the customer and supplier base.  Is a large volume of sales concentrated to a small group of key customers?  Is the seller heavily reliant on a particular vendor, and are alternatives available?   Is the manufacturer of the seller's products overseas or domestic?  These types of questions will allow the buyer to better understand the target company's diversification, concentrations, and risk exposure.   

9.   Inventory

If the target company includes a component of inventory, it is important to understand the details.    Is there inventory, and where is it located?   Is order fulfillment provided by the seller itself, the manufacturer, Amazon, or other third-party logistics (3PL) firm?  What are the mechanics to transfer such assets and any inventory-management systems or relationships should the transaction move forward?  How much inventory is included in the purchase price?   How does seasonality impact inventory levels, and will there be enough inventory at the time of the sale to meet the demands of the potential busy-season?  


Asking these threshold questions early in the discussions will help determine whether the prospective purchaser and seller might be a good fit for each other.   These questions should be probed at an early stage of the discussions, before a deeper and costly dive into due diligence is launched.   

Jennifer M. Settles, Esq. is a corporate lawyer at the Law Office of Jennifer M. Settles.   She advises clients on M&A transactions, commercial contracts, real estate matters, financing transactions and corporate law.  To schedule a free consultation with Jennifer, please call 602-617-3938, or email us though the  Contact Form on our website,

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