This article was originally published by Deal Studio on April 5, 2016.
Important questions to ask when looking at a business…or preparing to have your business looked at by prospective buyers.
- What’s for sale? What’s not for sale? Does it include real estate? Are some of the machines leased instead of owned?
- What assets are not earning money? Perhaps these assets should be sold off.
- What is proprietary? Formulations, patents, software, etc.?
- What is their competitive advantage? A certain niche, superior marketing or better manufacturing.
- What is the barrier of entry? Capital, low labor, tight relationships.
- What about employment agreements/non-competes? Has the seller failed to secure these agreements from key employees?
- How does one grow the business? Maybe it can’t be grown.
- How much working capital does one need to run the business?
- What is the depth of management and how dependent is the business on the owner/manager?
- How is the financial reporting undertaken and recorded and how does management adjust the business accordingly?