Questions to Ask a Business Seller Before You Make an Offer

Why do the right questions matter?

Most deals are won or lost in the first few conversations. Ask good questions and you learn what the seller really wants, where the risks are, and whether a structure with seller finance and seller rollover will fly. Ask poor ones, or none, and you find out in due diligence, after you’ve spent money.

Group your questions by stage. Some belong in the first coffee. Others come after an NDA (non-disclosure agreement) is signed.

First conversation: why are they selling?

The seller’s motivation decides almost everything else: price, timing and how they want to be paid.

1. What made you start thinking about selling?
2. What would you like to be doing in two or three years?
3. What matters most to you in who takes over?
4. How important is it that your staff are looked after?
5. Have you spoken to anyone else about buying the business?
6. What would a good outcome look like for you, beyond the price?

What you’re listening for: a seller who talks about legacy, staff and a steady income is a strong candidate for seller finance and rollover. A seller who only talks about a number has usually been advised to run a sale process.

The numbers: how reliable are the earnings?

Ask once the NDA is signed.

1. What were revenue and profit for each of the last three years?
2. Can we see the tax returns and bank statements for the same period?
3. What add-backs have you made, and can you show evidence for each? (An add-back is a cost added back to profit because it won’t continue under a new owner.)
4. How much do you pay yourself, and what work do you do for it?
5. Are there any costs that run through the business but are personal?
6. How seasonal is the business, month to month?
7. What’s owed to the business, and how long do customers take to pay?
8. What’s owed by the business: loans, leases, tax, suppliers?
9. What capital spending is due in the next two years?

These answers feed the debt service coverage ratio (DSCR), which decides how much debt the business can carry. See DSCR explained.

Customers: is the revenue durable?

1. Who are your ten biggest customers, and what share of revenue does each represent?
2. Are customers on contracts? How long, and can they be transferred to a new owner?
3. How many customers have you lost in the last two years, and why?
4. Do customers buy from the business, or from you personally?
5. How do new customers find you?

People: who runs the business day to day?

1. Who are your key staff, and how long have they been with you?
2. Would the business run for a month without you?
3. Do key staff know you’re considering selling?
4. Are employment contracts, entitlements and pay records up to date?
5. Who holds the licences or registrations the business needs?

Operations and assets

1. What systems and software does the business run on?
2. What equipment or vehicles does it own, and how old are they?
3. Is the premises leased? How long is left, and does the landlord have to approve a sale?
4. Are any key supplier agreements dependent on you personally?

Legal and compliance

1. Are there any current or threatened disputes, claims or complaints?
2. Has the business had any regulatory issues or audits?
3. Are there contracts with change-of-control clauses? (A change-of-control clause lets the other party end the contract if ownership changes.)
4. Who owns the intellectual property: the brand, website, software and content?

For the issues these questions should flush out, see due diligence red flags.

Deal structure: how do they want to be paid?

Ask these before you put a number on the table.

1. Would you consider being paid part of the price over time from the business’s cash flow? (That’s seller finance.)
2. Would you be open to keeping a stake in the business and sharing in its growth? (That’s seller rollover.)
3. How much do you need at settlement, and what would you do with it?
4. How long would you be willing to stay on to hand over?
5. In what role, and for how many days a week?
6. What’s your timeline?
7. Who else needs to be part of the decision: a partner, spouse or adviser?

How should you ask these questions?

• Earn the right first. Motivation questions come before financials.
• Ask open questions and follow up with "tell me more about that".
• Write it down, and check every answer against documents later.
• Never argue with an answer in the moment. Note it and test it in due diligence.

What answers should worry you?

• Vague or changing numbers.
• Reluctance to share bank statements once an NDA is signed.
• "The customers all deal with me."
• Big add-backs with no evidence.
• A refusal to consider any form of payment over time, combined with a high price.

What makes sellers say yes?

In our experience it’s the buyer who asked about their plans first. Josh Li bought two clinics with 100% seller finance because the owners trusted him with what they’d built. Questions that show you care about the staff and customers earn that trust far faster than questions about the price. When the answers line up, move to a letter of intent.

Want help running these conversations?

On an acquisition strategy call we look at your business and map your first target. We’re in the room for the conversations that matter. See if you qualify.