Examining the Mind of the Serious Buyer – 5 Points to Consider

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 710 words

A serious buyer studies five things closely in almost every company: the industry and the company's place in it, discretionary spending, wages and turnover, cash flow and inventory, and the equipment and capital spending the business will need. Prepare each of them before going to market and you remove most of the surprises that lower offers during due diligence.

Thinking like a buyer is the fastest way to find your company's soft spots. Serious buyers, whether a strategic acquirer, a private equity group or an experienced individual, ask similar questions. Here is what they are looking for, and why.

1. Your industry and where you stand in it

Buyers want to understand the market as a whole: whether it is growing or shrinking, who the competitors are, what threatens it, and how your company compares. They will look at your customers, your prospects, and the strengths and weaknesses of your position.

Help them with a clear, honest summary: what the company does better than its competitors, where it is exposed, and what drives demand for its products or services. Do not assume a buyer knows your industry. Explain how it really works, including the parts that outsiders tend to misread.

2. Discretionary costs, and whether they were cut to look good

Discretionary costs are spending you choose rather than must make: marketing, training, research and development, maintenance and public relations. Some owners cut them sharply before a sale to raise profit. Experienced buyers notice. A sudden drop in marketing followed by flat sales, or maintenance put off for a year, tells them the profit was borrowed from the future, and they adjust the price.

Keep this spending at a normal, sustainable level. Legitimate adjustments, such as owner-specific or one-time costs, belong in a transparent financial recast instead. See how add-backs affect value.

3. Wages, benefits and turnover

Pay tells a buyer how stable the workforce is likely to be. Wages well below market, thin benefits or no retirement plan often go together with high turnover, which disrupts operations and raises hiring costs.

Buyers will also check whether key people are paid enough to stay, and whether any family members on the payroll are paid at market rates for real work. If pay is below market, a buyer will build the cost of fixing it into its numbers, so it is better to address it, or at least explain it, first. Written job descriptions, a simple pay structure and records of raises and reviews show that the workforce is managed deliberately rather than by habit.

4. Cash flow and inventory

No serious buyer skips cash flow. It wants to see that the business generates cash consistently, not just accounting profit, and that the pattern will continue. Buyers also look at working capital, the cash tied up in receivables and inventory, because a normal level is expected to stay in the business at closing. Monthly statements for the last few years, reconciled to the bank, answer most of these questions before they are asked.

Inventory gets close attention too. Obsolete, slow-moving or unsalable stock will be found in due diligence and deducted from value. Identify it yourself, write it down or sell it off, and disclose what remains rather than hoping it goes unnoticed.

5. Capital expenditures

Finally, buyers examine capital expenditures: the age and condition of machinery, vehicles, facilities and systems, and what will need replacing soon. A company that has kept its equipment current avoids a price reduction for looming costs. Keep maintenance records and a list of major equipment, with its age and condition, ready to share.

Beyond these five, buyers will review contracts, financing arrangements, legal and environmental matters and regulatory compliance. Thinking through each area from the buyer's side is the surest way to find problems while there is still time to fix them.

How we prepare you for a serious buyer

MDR & Associates prepares a financial recast and a confidential marketing package that answer the predictable questions before buyers ask them, screens every buyer for funds before it sees detail, and works alongside your attorney and CPA through due diligence. For more on getting ready, see what causes a sale to fall apart in due diligence and business valuation, then request a free valuation snapshot.

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Questions owners ask next

Should I cut expenses before selling to boost profit?

Cut genuine waste, but do not slash marketing, maintenance or training just to show higher profit. Buyers look at trends, will see it, and will then question the rest of your numbers. Owner-specific and one-time costs are better handled as documented adjustments in a financial recast.

What happens to obsolete inventory in a sale?

A buyer will usually exclude it from value or deduct it from the price. It is better to identify it yourself, write it down or sell it off before going to market, and disclose what remains. Hiding it only means it is found in due diligence, where it damages trust as well as price.