The questions you ask before making an offer determine the quality of the decision you make. Most buyers ask too few questions too late — after they've already decided they want the business and are looking for confirmation rather than honest evaluation. These are the questions that matter.
Financial Questions
1. What do the tax returns actually show? The broker presentation will show adjusted EBITDA with add-backs. The tax returns show what the business reported to the IRS. These two numbers are often significantly different. If the seller won't provide tax returns, the deal is not ready to evaluate.
2. Walk me through every add-back — one by one. Each add-back deserves independent scrutiny. Ask the seller to explain each one and then verify it. Rejected add-backs reduce the EBITDA the purchase price is based on.
3. What does the most recent 12 months look like compared to the prior 2 years? Revenue trends matter more than the most recent year's snapshot. Request month-by-month data for the past 36 months and map the trajectory.
4. What is the actual owner compensation — total, including all benefits and perks? Cash salary is the visible component. Health insurance, vehicle, phone, meals, and travel run through the business are often not presented in full. Total owner compensation is what matters for normalized EBITDA.
5. What capital expenditures were made in the past 3 years? What is deferred? A business that has deferred maintenance shows artificially high EBITDA. Ask for a capital expenditure history and a list of known deferred items.
Operational Questions
6. Why are you selling? The answer matters less than how the seller answers. A seller with a clear, credible reason is easier to evaluate than one with a vague or evasive response.
7. What does a typical week look like for the owner? An owner working 60 hours per week at a $60,000 salary is effectively compensated at $19/hour. Understand the hours before accepting the EBITDA.
8. Who are your top 5 customers and what percentage of revenue do they represent? Customer concentration is one of the most consequential risk factors. If 40% of revenue comes from one customer with a personal relationship with the current owner, that revenue may not transfer.
9. Which employees are essential — and which will stay? Key employee departures after a transaction are one of the most common post-acquisition operational challenges. Ask directly about retention expectations.
10. What would you do differently if you were starting over? This question produces more useful information than most sellers realize they're providing. Where a seller has regrets, there are operational problems.
Lease and Legal Questions
11. What are the remaining lease terms — including all renewal options? Request the full lease document. The seller's summary is not a substitute for reading the actual document.
12. Are there any pending or threatened lawsuits or regulatory actions? Ask directly. Require a representation and warranty in the purchase agreement covering this question.
13. Are all licenses and permits current and transferable? Identify every license required to operate and verify the transfer status of each.
14. Are there any outstanding tax obligations — federal, state, payroll? Tax liens can attach to business assets and transfer to the new owner in an asset purchase if not properly addressed.
Risk Questions
15. What has changed in your competitive environment in the past 3 years? New competitors, pricing changes, and shifts in customer demand all affect the forward revenue outlook.
16. What are the top three operational challenges you face? A seller who answers candidly is giving you useful information. A seller who says there are no significant challenges warrants further probing.
Transition Questions
17. What transition support are you willing to provide? Negotiate transition terms in the LOI, not at closing.
18. Are you willing to sign a non-compete? Non-competes are standard in small business acquisitions. Resistance to signing one is a data point worth understanding.
19. What do you know about this business that I haven't asked about yet? This question produces disclosures that sellers often provide willingly when asked directly.
20. What would it take for this deal to not close? Understanding the seller's deal-breakers early saves time for both parties.
Frequently Asked Questions
Financial questions should be asked before you spend significant time evaluating the business. Operational and risk questions are typically addressed during due diligence after LOI. Transition questions should be negotiated in the LOI, not left for the purchase agreement.
Refusal to answer material questions — particularly financial questions — is a significant red flag. A seller who won't provide tax returns or explain add-backs is asking you to trust representations you can't verify.
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