4 Questions to Ask Yourself Before Buying a Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 780 words

Before you sign a letter of intent, you should be able to answer four questions yourself: what exactly the sale includes, which assets actually produce the profit, how you will grow the business and pay for that growth, and who will run it day to day once the seller leaves. If any answer is still a guess, you are not ready to make an offer, however good the company looks.

These are not questions to fire at the seller in one sitting. They are the ones you work out from the marketing package, the meetings and your own advisors, and write down before you commit.

1. What exactly am I buying?

Never assume. A sale can include or leave out the real estate, inventory, vehicles, specialized equipment, cash in the bank and money customers still owe. Two offers at the same price can buy very different things. The letter of intent should list what is in and what is out, and the purchase agreement should repeat it in detail.

Real estate deserves its own decision. If the seller owns the building, you might buy it, lease it from the seller or move. Each choice changes how much capital you need and what the business costs to run. Inventory raises a second question: how will it be counted and valued at closing, and who carries the risk of stock that no longer sells?

2. Which assets earn the money, and do they transfer?

Many companies depend on something that never shows up on the balance sheet: a formula, custom software, a library of product designs, a trademark customers recognize, a license, or approved-vendor status with a large customer. Identify that asset, find out who legally owns it and confirm that it passes to you. Owners sometimes hold the trademark or the software in their own name rather than the company's.

If something central is not included, ask why, and price your offer as if you will have to replace it. A business without the thing that makes it profitable is a different and cheaper business.

3. How will I grow it, and what will growth cost?

You pay for the earnings the business has already proved. Your return depends on what you do next. Before you commit, write down two or three concrete growth moves: a new service line, a second location, better pricing, or sales effort the owner never made. Ask the seller what they would do with more time or capital; many have ideas they never had the energy to pursue.

Then work out the working capital you will need. Working capital is the cash tied up in running the business day to day, mainly receivables and inventory minus what you owe suppliers, and growth usually needs more of it before it pays back. Our answer on how working capital affects the purchase price explains how the amount left in the company at closing is negotiated. Plan your borrowing with the whole picture in view; our page on business financing outlines the usual structures.

4. Who runs the business after the seller leaves?

In many owner-run companies, the owner is the top salesperson, the estimator, the person key customers call and the one who handles every crisis. When the owner leaves, each of those jobs needs someone new, and that someone may be you. Be honest about which roles you can fill and which you must hire for, and put the cost of those hires into your numbers.

Ask who the managers are, how long they have been there and whether they intend to stay. A capable second layer of management is worth a great deal, and its absence is a risk to price in. Our answer on the discount for owner dependence explains how buyers usually reflect it.

Turning your answers into an offer

When you can answer all four questions in writing, you know what you are buying, what could go wrong and what it will cost to make your plan work. That is the basis for a sensible offer and a focused due diligence list. If one answer keeps shifting as you learn more, treat that as information about the business, not as an obstacle to push past.

Where MDR & Associates fits

We represent sellers, so when you look at one of the companies we are selling, we sit on the owner's side of the table and say so. What you gain is a company presented with a financial recast, a clear statement of what is included and an owner who has been prepared for exactly these questions. If you are weighing a purchase and want to understand how our sales run, talk to us.

Where this fitsBuy a business in Texas →

Questions owners ask next

Should the purchase price include the real estate?

It depends on your capital and plans. Buying the building ties up more money but gives you control of the location. Leasing from the seller keeps the purchase smaller and gives the seller ongoing income. Many deals separate the two, with a lease signed at closing. Your lender, CPA and attorney should weigh in before you decide.

What if the seller will not include a key asset?

Ask why first. Sometimes the owner uses it in another business or wants to keep a building for retirement income. You can ask for a long-term license or lease on fair terms, lower your price to reflect the cost of replacing it, or walk away if the business cannot work without it.

How much working capital should I plan for beyond the price?

There is no universal figure. Look at how cash moved through the business month by month over the past few years, including seasonal dips, then add what your growth plan needs. A CPA can build that forecast, and lenders will want to see it before they commit to financing the purchase.