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What are common questions from buyers?

Before purchasing a business, typically, a buyer will have a wide range of questions to ask to help gain more insight into the business and its operations. This includes questions about financial performance, business operations, clients, market conditions, assets, intellectual property, due diligence, and questions about the seller themselves. 

Here are some common questions a buyer might ask: 

1. Why are you selling your business?
Whether it is retirement or simply because you wish to start a new venture–be honest. A buyer will assess your answer by how genuine and reasonable the response is. They may also be looking to see if there are any problems with the business, however being honest establishes trust and allows you to tell your story. 

2. How long has the business been in operation? 
The longevity of a business is a major factor in determining the current and future success of a company. It allows them to gauge the industry experience and stability of the business.

3. What are the sales figures and margins?
Before a buyer decides to purchase your business, they will ask to see the company’s financials to assess the return they can make from an investment. Being honest and transparent about your company’s financial performance can help build buyer confidence. 

4. What are the liabilities and assets attached to the business?
Any pending liabilities or debts should be disclosed to the buyer before due diligence. Should they appear during due diligence, buyer confidence and trust might be reduced. At the same time, a buyer will want to know which assets are associated with the business to get a more comprehensive understanding of its operations.

5. Are there any current or past legal/regulatory disputes?
If there is a history of legal disputes, a buyer will want to know this information before moving forward with negotiations and due diligence. Being transparent about your company’s history allows you to explain your side of the story, whilst maintaining a level of trust and understanding. 

6. What do the day-to-day operations of the business look like? 
The buyer may ask for a more comprehensive understanding of the business’s operation such as your involvement, major operations, and other relevant factors 

7. What is the customer base and who are the key customers and client relationships?
This question is usually to gauge how reliant your business is on certain customers or suppliers. This allows the buyer to assess the stability of your business and understand the risk associated with your client and supplier base. 

8. Are there any current or potential market threats and challenges?
Buyers want to understand the market, key trends, and competitive landscape before deciding to purchase. You can use this opportunity to talk about your business’s unique strengths and any business plans you have in place to mitigate potential risks. 

9. How much are you selling the business for?
While this question may seem self-explanatory, understanding price expectations lets buyers assess their financial capacity, and assess how the price is in comparison to other competitors on the market. Additionally, this question serves as a negotiation strategy. By evaluating the initial assessment, they can then determine if there is any room for adjustment.

While a buyer may ask multiple questions, it is ultimately up to you to decide which information you wish to share. However, the more transparent you are with your sales process, the more efficient the due diligence process will be. We recommend that both parties sign a non-disclosure agreement (NDA) before asking or answering any questions that are sensitive in nature.

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