Buying an operating business involves much more than comparing advertisements and asking prices. You need to understand the activity, the transaction structure and the evidence behind each claim. This guide offers a practical starting point for questions and risk assessment.
Practical example
Simply asking “Is it profitable?” is not enough. Request multi-year figures, understand adjustments and find out who actually runs daily operations.
What to check before moving forward
What exactly changes hands?
Establish exactly what is being acquired: shares in a company, specified assets or an operating business unit. Put the transaction perimeter in writing, including clear inclusions and exclusions.
Accounts and financial history
Ask for several years of accounts and recent management figures, not one isolated number. Reconcile accounting data with tax filings, bank information and segment performance where appropriate.
Customer concentration
Examine customer mix and reliance on a few major accounts. High revenue can be fragile if it depends on a single contract or the outgoing owner's personal relationships.
People and employment obligations
Understand who performs critical tasks, what know-how sits with employees and what happens after ownership changes. Review contracts, costs and possible employment obligations with specialists.
The owner handover
Agree how know-how, relationships and daily responsibilities will move to the new owner. Specify handover duration, the seller's role and limits on availability.
How to use this guide
Start by requesting sources for each important claim and noting what remains unverified. Cross-check answers against records, visit the operation where appropriate and bring material risks to an adviser before committing. Never fill missing financial figures with your own assumptions.
Evidence worth requesting before you proceed
A sales description is a starting point, not proof. These documents help distinguish verifiable facts from expectations:
- Financial statements for the last three years
- Current third-party contracts
- Anonymised revenue by customer
Request information appropriate to the negotiation stage and respect confidentiality arrangements. Sensitive documents may be shared only after a buyer is identified.
Final takeaway
A sound transaction starts by defining what changes hands, checking the facts and documenting the agreement. Use this guide as a map of questions, not a replacement for a review tailored to the actual business.
General information only; not personalised legal, tax or financial advice. Rules depend on the transaction and may change.