Buying a Small Business Checklist. Ask all the right questions

If you're thinking of buying a small business, take a quick run through this small business checklist, before making your decision to buy.

Ensure you have asked all the right questions, and have all the right answers.

Review the questions you should ask before buying a business and make sure the first thing you asked yourself is ...

Will I enjoy owning that business and selling its products.

Small Businessman Checklist

The Small Business Checklist ...

When thinking of buying a small business, never be rushed into buying without using a thorough business evaluation checklist, to ensure you cover all the basics of the business.

Why is the business being sold?

  • Does the reason given sound reasonable?
  • How long has the business been in operation?
  • Is it young with potential or old and established?
  • Has the business still got potential for future growth?

How profitable is the business?

  • Get your accountant to check the audited statements and tax returns.
  • What is the cash position of the business?
  • Is it having difficulty collecting outstanding accounts?
  • Are sales increasing or declining ?
  • If sales are declining can this be turned around easily?

Are there any lawsuits or legal actions pending or in process, against the business?

  • How are these likely to effect the business?
  • Have there been any past suits and if so how have they turned out?
  • Does the business have any contracts with customers or suppliers and does the owner consider them good or bad?
  • Has the business or senior business management ever been investigated by the police or a government department?
  • Expand the questions you ask here if there are complicated legal matters that need to be explored.
  • Take a note of these in any sales agreement and clearly state who will be responsible for legal and administration costs.

What does the business owe in the way of debt?

  • Are these borrowings, shareholders debt, liens or supplier debts?
  • Are the amounts owing reasonable for the business size and turnover?
  • Does the business have all the equipment needed to operate and produce the goods it sells?
  • Is any machinery or equipment financed, owned or hired? Is it due for replacement?
  • Are the raw materials or goods of the business readily available?
  • If there are few suppliers what would happen if any of them went out of business?
  • Is the business tied to specific supply contracts. Are these fair, equitable, long standing or due for renewal?

Are essential product or service suppliers sound?

  • Expand this with questions that are relevant to the type of business
  • What does the inventory of the business amount to from a sales point?
  • Is the inventory obsolete, unfashionable or of poor quality?
  • Don?t buy inventory that you can't use or sell

Ask about and check the market share of the business sector. Don't believe everything that you are told when thinking of buying a business.

How does the business sell its goods or services, what selling techniques are used?

  • Are they successful?
  • Can you see possible improvements?
  • What is competition like in the industry sector?
  • Is the business matching, beating or declining because of competition?
  • Is the competition increasing or declining and why?

What is the customer base like, what are the demographics ...

You need to be clear on these points when evaluating a business. The ideal is to have a base where no single customer accounts for more than 10% of total sales.

  • Who are the customers and are customer numbers increasing, steady or declining?
  • Are sales reliant on one or two large customer accounts or many smaller ones?
  • How secure are the customers for the business?
  • Will the business survive if any large customers stop buying?
  • Is the business seasonal? If so check the low season sales levels.
  • What does the seller estimate the potential for growth in sales is? Do you agree?

What are the employees of the business like?

If you have doubts about some, ask if the present owner would be prepared to pay them off.

  • Are the employees unionized? This need not be a problem but be aware if they are.
  • Is the management staff good, how long have they been employed and will any leave if you buy?
  • If the business has very specialized employees you will want to know and assess these employees and review employment contracts.
  • What has employee turnover been like? High turnover is not a good sign.
  • How do wages and benefits compare to average industry wages?
  • If wages and salaries are way above average, why is this so?

Small Business Checklist Summary

Absolutely Essential Small Business Questions ...

Will the owner agree not to to compete with the existing business for an agreed period of time?. This really should be a condition of any sale.

If the business is in rented premises, are the leases sound, transferable, extenable or of reasonable length?

If the business premises are owned, are they owned by the business, or included in the sale with ownership passing to the new owner?

Are the premises of the business safe and secure, both in summer and winter?

Is there anything unique about the business that you like? Has it some special potential that you see which will make it a good investment?

Check any patents, exclusive rights or markets that have special potential. Will they be transferred and belong to you or the business. Seek legal advice here, as there will be specific legal questions that need to be added to your small business checklist.

If the seller shows any reluctance to answer questions or release documents, beware and check more thoroughly, or walk away.

If you are being pressued to make up your mind, before you are happy, because others are ready to buy, be wary.


Any genuine seller that really wants to sell their business will happily provide answers to all your questions and ensure you are the right person to take their business forward.