55 Questions to Ask When Buying a Business

55 Questions to Ask When Buying a Business

Acquiring a business requires time, effort, and money. An acquisition can transform and grow a business overnight. But purchasing the wrong target company wastes time and resources, and causes distractions. Every acquirer must analyze, investigate, and perform due diligence to ensure that doesn't happen. 

The entire process of buying a business can be daunting. However, with the proper research and attention to detail, an acquisition can lead a business to successful growth.

With the help from experienced business practitioners, who regularly share their insights and latest industry trends on the M&A Science Podcast, we have compiled the following list of 55 questions to ask when buying a business:

Business Readiness Questions

Before asking questions to the seller or target company, ask the following questions: 

1. Why buy the business?

What is the goal of the acquisition? Is the acquisition’s purpose to acquire specific technology or enter into a new market? A good deal rationale will set the tone for everything else. 

2. Why not build internally?

Why buy the product or service instead of building it from scratch? Is it more expensive to build from scratch? Is it because of time-to-market? A buy-or-build analysis is crucial when deciding to acquire a company, which requires collaboration with the CEO and functional heads.

3. Is the acquisition affordable?

Funding an acquisition can be tricky, depending on the acquirers financial capability. There are three ways to fund a transaction: equity financing, debt financing, and cash reserves.

  1. The simplest is cash reserves, paying the entire deal with excess money in the balance sheet. 
  2. Equity financing is the act of raising money by exchanging equity. This method is risky, as losing too much equity might affect ownership. 
  3. Debt financing is raising money from lenders, and repaying them later, typically with interest. Debt financing is harder to obtain and will depend on the consolidated debt capacity of the company. 

4. Can the team’s resources handle M&A?

M&A is massive and will require many people to execute the entire process. Not to mention that it could take months and, in some instances, a year to finish. Also, the people involved in the transaction will most likely juggle their day job while participating in the deal. Dedicated and capable people is a requirement for any company to execute M&A. 

5. Where to find third-party consultants?

Aside from the internal team, getting outside help has its benefits, and is sometimes necessary. It is important to understand where to find third party consultants and the costs associated with hiring them. 

6. Is there a culture fit?

It's never too early to do a cultural assessment of the target company. Even at a high-level view, massive differences will be noticeable. For instance, a traditional company trying to acquire a millennial-dominated startup might have problems due to a substantial generational gap. Further diligence is required. 

7. Is this the best target company available right now?

Are there any other alternative targets? Look around, it doesn't hurt to ask. 

Questions about the Business’s History

Now it's time to approach the target company and ask a few questions. Before fully committing all efforts and resources, obtain a high-level view of the company and get to know the seller. 

8. Why sell the business?

There are several reasons why business owners sell their companies, and some of them can be deal-killers. Knowing why a business is being sold upfront can give buyers confidence or the ability to walk away as soon as possible.

9. When did the business start?

Longevity is a good indicator of business success. The longer the business has existed, the safer it is to purchase. Chances are, they have good customer loyalty, a solid reputation, and overall stability. However, startups are often less expensive and have more potential. Business duration is a good starting indicator of the business’s quality.

10. Are there any other investors or owners? 

Is the seller the 100% owner of the business? Or do they have capital investors? Are they selling their shares too? How much of the company is for sale? 

11. Was there ever a lawsuit against the business or the owner?

In the business world, past or present litigation matters. It’s a good indicator of culture, values, and, most importantly, reputation. Also, litigation can open the acquirer up for liabilities. If the target company has legal problems, the buyer will inherit those problems as the new owner. 

Future Business Growth Capabilities

What about the future of the business? Has the business maxed out its potential? Or can the company grow with extra help? Those are important questions during an acquisition. 

12. Does the business have the potential for hypergrowth?

Often, acquirers make the mistake of ignoring opinions and the owner's vision regarding their business. But the fact is, no one knows the company more than the owner does. If they are one step away from achieving hypergrowth, they might know what to do, but just lack the capabilities or funding to achieve it.  

13. Is the business too dependent on the current owner?

A business heavily dependent on the owner could cause problems, especially if they are retiring. That massively cuts the value of the company, even though the owner may not see it that way. Also, putting all hopes on one person that could walk away anytime is not a good idea. If it seems impossible to replicate the owner's role or automate the processes, think twice about buying the business. 

14. Is there someone who could run the business?

It's time to find a deal sponsor; Someone who can inherit the business forward. If the business is not dependent on the current owner, find a suitable replacement that can handle the business and its day-to-day operations. The location of the business is also crucial. If the business is overseas, and there is no willing employees to move there, that could be a problem. 

Financial Questions & Valuation

Never buy a business without looking at concrete financial data. A business valuation goes beyond understanding the growth path of the target and verifying transactional elements is essential. Typically, there is an NDA in place before the seller would agree giving out sensitive financial information.

15. What is the business revenue?

How much money is generated from the regular business operation? If most of the money comes from non-operating income, that means their products are not sellable and acquiring this company might be a lost cause. This question entails getting all of the financial statements for the past five years.

16. How much profit does the business make a year?

Profit is not the same as revenue, and a business can have high revenue with no profit due to high fixed costs. It's essential to understand how profitable the business is.

17. Does the seller have any outstanding debt?

Look at the debt schedule. As the one inheriting the debt, it is important to understand each and every detail of the debts incurred by the company. 

18. What are the company's assets?

Ask for a list of all the long-term assets owned or leased by the business. For the assets owned, they should provide dates of purchase to give an idea of the length and estimated usage of each machinery. It will also help understand the depreciation, condition, and remaining value of the assets. For leased property, ask for the contracts whether it's machinery or real estate.

19. How much is in the business’s bank account?

A bank account balance will give a good estimation of the business’ operating cost. There is also the matter of business continuity. Since all the salaries, receivables and payables go through that bank account, inheriting it is easier. Just put the account balance on top of the overall purchase price so that the transaction doesn’t disrupt the business operation. The treasury team should secure all the necessary signatures and forms to transfer the bank account successfully. 

20. Is the business tax compliant? 

If the target company is not tax compliant, the acquirer will inherit the potential problems with the government. Secure the following:

  • All income tax returns for the past three years
  • Sales tax returns for the past three years
  • Tax settlements or outstanding tax investigations
  • Details of outstanding tax liabilities and tax liens
  • Employment and excise tax filings

21. What does the business's quality of earnings look like?

A quality of earnings report is a good indicator of a company's profitability under new ownership. This process removes one-time events from their income statement and focuses on EBITDA. (Earnings before interest taxes depreciation and amortization) 

22. What is the projected sales for the next year?

Look at the trajectory of the business. Does the business have something in the works that is geared towards boosting sales? Do they have new opportunities? Do they have incoming new clients? Getting their rough estimate is an important part of evaluating their business. 

23. What is the seller's asking price?

How much is the asking price? If it is unreasonable, consider walking away before wasting anymore time. It’s very common for entrepreneurs to be emotionally attached to their business, which skyrockets their expectations. If it’s too low, consider sealing the deal quickly before any buyer swoops in and triggers an auction.  

24. How much have similar businesses recently sold for?

Regardless of the number and what the business looks like, it’s important to know the fair market value for the specific type of business. Research or ask around how much similar businesses have recently sold for to get an idea of how much to pay. 

Questions About Day-to-Day Operations

Even if the numbers look good, what about the daily operations? It’s time to think about integration and company culture.   

26. How many employees does the business have?

Obtain the business’s org chart and headcount by function. This will provide insight into the critical players crucial involved in day-to-day operations and the overall size of the business. This question also entails getting employment contracts. Gain access to sensitive information such as compensation, bonuses, and other details regarding every employee.

27. Have there been any layoffs or material changes to the workforce in the last 24 months? 

Like it or not, culture matters. If the target company is throwing out employees left and right, that says a lot about their culture and how they treat or retain employees. Try to uncover if there are employees who left out of anger or were mistreated during their tenure, which could lead to possible lawsuits in the near future. 

28. What are the products or services of the business?

Get a list of the products sold, or service provided, with description. Knowing everything about these products will help during integration, especially in creating a go-to-market strategy. 

29. Does the business have intellectual property, trademarks, or patents on their products?

Are their products special? If so, are they protected or registered? If they have no protection on a special product, then it is virtually useless because another company can copy it easily. Is it too late to register now? If their product is the deal rationale for acquiring the company, then this could be a deal breaker.

30. How does the business produce products?

This question provides a detailed view of what the day-to-day operations look like. How do they acquire their product? Do they make it from scratch? Do they buy parts and assemble it themselves? Or do they just buy and sell the products? Knowing the workflow will help accurately identify key people to retain, the pieces of equipment and tools needed for daily operations, and cost synergies. 

31. Are the facilities, equipment, fixtures, and vehicles in good working condition?

If the sales are great and the products are great, but you cannot produce anything because the equipment is broken, then it's all for nothing. If all the vehicles needed to sell or deliver the product don't work, how will the business operate? Replacing or repairing everything will cost a lot of money and should be deducted from the overall valuation. 

32. Who are the suppliers?

While trying to understand the operation, also get the supplier list. Who are the partners in producing the product? Do they have an existing contract? What are the limitations of the contract? If a supplier wishes to stop selling, can the business still operate?

33. How does the business sell?

Arguably, one of the most critical questions to ask before acquiring a company is how does the business sell their product or services? Where do they sell? How do they deliver? How do they collect payment? Achieving the revenue synergies is almost impossible without understanding the quote-to-cash process. 

34. Who are the customers?

The customer list with a breakdown of revenue by a customer is another important piece of information to obtain. Who are the top clients? Do they have contracts or can they leave anytime? How many customers do they have? And most importantly, who are the typical buyers of the product? 

35. How does the business acquire new customers?

What is the go-to-market strategy? How do they acquire new customers? Do they have proactive sales reps? Physical stores? Social media? And what is the customer acquisition cost? Understanding the prospect-to-customer process is also key to integration.  

36. Has there been customer churn in the last two years? 

How many customers has the business lost? Do they know why? Is it something serious? Or is it because of better competition?

37. Who are the competitors of the business?

Knowing the competitors will help paint the entire landscape of the industry. Understand who they are, what they are doing, and what you can do to outgrow them. 

38. Does the business have any existing partnerships with other entities?

Any joint venture or partnership agreement the business has entered into must be identified, especially if they are taking a percentage of the profits.

39. Any other contracts or agreements the business has entered into?

Are there any non-operating contracts the business has entered into? Acquirers inherit contracts and obligations. It could be as simple as a promise to donate money to a certain charity every year. 

40. Does the business have the proper licenses and permits to operate?

Secure necessary permits to operate the business, licenses to use special machinery, and any other government mandated licenses. Does the business have all of the necessary permits and licenses? If they do, are they all transferable to the new owner? If not, is it possible to secure ones? Otherwise, it might not be possible to own the business after all. 

41. What kind of technology does the business use?

Today, technology is crucial for any businesses. It's very safe to say that the target business uses technology tools. What are the tools used? Can the tools be migrated to another system? Is it necessary to upgrade their computer hardware to be at par? This information directly impacts the integration budget.

42. Will the business be the same under different ownership?

Probably the most important question in this list, how will the company look like after the sale? If the plan is to relocate the entire business, can it still continue to run properly? If a huge part of the business relies on the owner's name or personality, then it's going to be impossible to replicate.  

43. Is the target company better left alone? Or integrated?

Integration is the most delicate part of the transaction. Properly assess how much integration is possible to achieve synergies without breaking the company's value.

44. Does the seller have better processes?

It is also possible that a target company has a better process. Be open to reverse integration and adapt to their processes instead of the other way around. 

45. Is the seller happy about the integration plans?

A big mistake that acquirers make is not listening to what the seller has to say about the integration plan. Remember that the seller is good at what they do. Be open to suggestions and align with their business leaders of what the company should look like after the transaction.

Purchase Contract Questions

It's time to put everything in writing. 

46. How many risks are involved?

After gathering all the information, how many risks are involved? Even with the risks, is the deal still viable? Can you mitigate those risks in a contract?

47. What are the things included in the transaction?

Focus on the disclosure schedule in contracts. It contains what is and is not included in the overall transaction. 

48. Is the seller willing to help during the transition?

In some instances, like a carve-out, acquirers require help from the seller to transition the business. A transition service agreement must be secured before the deal closes. However, even if it's a stock acquisition, sometimes, the owner needs to stick around for 90 to 100 days. Is the owner willing to stay for a little longer? Put it in writing. 

49. Is the seller willing to sign covenants to protect the business?

As the previous owner, the seller know all the business's trade secrets. Can they promise not to compete against it after the transaction? Will they share the secrets of the business to other companies or competitors? Also, other employees might have a deep loyalty to the owner and follow them wherever they may go. Protect the business and put covenants such as NDAs, non-solicitation and non-compete clauses in the contract. 

50. What are the things that the seller is willing to represent and warranty?

Reps and warranties are crucial for any transaction. These are statements of fact that the seller made to attract buyers. If any of them turn out to be false, reps and warranties allows the acquirer to claim damages. The most common example of this is the legality of the business. If the business turned out to be illegally operating, then reps and warranties can cover the damages. List down all the things the seller is willing to represent and warranty. 

51. What are the other items needed to close the transaction?

Signing and closing right away rarely happens, and acquirers must identify other closing requirements to close the deal. The most common ones are regulatory approvals from the government, shareholder approval, and third -party approvals such as landlords' permission to transfer the lease, or the money, if doing debt financing. 


At this point, all that's left is to sign the contract. But before you do, here are some final questions to ask before signing a deal.

52. Was the seller nice during negotiations?

During negotiations, was the seller pleasant to work with? If they are unbearable, it might be an indicator of future culture clashes that will disrupt integration.

53. Is the target company socially responsible?

Not everyone cares about ESG, but it is slowly becoming the new trend globally. If this matters, then look at their ESG initiatives and identify if there is alignment on values and goals. 

54. How will the deal be announced?

Announcing the deal can make or break the transaction. A poor announcement can scare all the employees and cause them to leave. The same can be said for newly acquired customers. Plan with the communication team carefully and get support from the target leadership. 

55. Is everyone on the deal team happy about the transaction?

M&A is a massive undertaking that requires a huge team to finish. Having worked on the transaction, the deal team’s opinion matters. They are the ones that were in the trenches working with the target leadership and discovering the risks first-hand. If they think this is not a good purchase, talk to them about it before proceeding to sign the contract. 

56. Are you happy with the company?

Last but not least, are you happy with the transaction? At the end of the day, the buyer has to be confident and satisfied with the purchase. 

Mistakes to Avoid When Buying a Business

We have provided 55 questions to ask when buying a business to prevent owners or corporate development from acquiring the wrong business. However, even with the right target, pulling off M&A is an arduous task. Statistics show that over 50% of deals fail due to inefficiencies in the process and framework. Here are mistakes to avoid when buying a business:

Lack of integration planning

Asking the questions above will help identify if the company is a good purchase. However, what happens after is a different story. Most transactions often include integration planning, but not  early enough. To make matters worse, some teams start integration planning after signing the purchase agreement. And in some instances, the people that created the integration plan were never involved in the diligence process. These are all recipe for disaster. Integration planning needs to start as early as possible. The earlier, the better. 

Working in Silos 

M&A requires a considerable amount of people to complete? If those involved in the transaction work independently from one another, it will cause problems that will destroy the value of the business. Try using Agile M&A, a framework focused on collaboration and communication between teams, centered around integration planning with the deal rationale in mind. Learn more about it here:

Lack of commitment from the leadership team 

Before conducting M&A, there needs to be a fully committed deal sponsor, someone who will inherit the business after the deal is closed and will take responsibility of running it's daily operation. If no one will take ownership, the newly acquired business will be in jeopardy.

Understaffing the Deal Team

Never understaff the deal team just to save a few bucks. An extra one to two people can make all the difference between a burnt-out team and a well-oiled machine. 


Buying a business is life-changing if done correctly. The list of questions to ask when buying a business above is a good starting point to identify readiness and the target company’s quality. However, don’t feel limited by the above set of questions. Feel free to ask more specific questions, depending on the type of business and industry of the target company.

The most important thing to remember is to have a strategy behind the acquisition. 

Further M&A Insights

Questions to ask when acquiring a company are just one of the M&A-related issues in which the M&A Science Podcast does a regular deep dive analysis.

The podcast, now in its fifth year, brings in industry-leading perspectives, expert insights, and stimulating and contrasting viewpoints to add to any M&A practitioner’s arsenal. Join us today!

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