When you find a business that looks interesting, the seller or their broker will ask you to sign a Non-Disclosure Agreement before sharing detailed information. Before you commit to confidentiality and invest time in due diligence, make sure you're asking the right questions.
Why These Questions Matter
Signing an NDA isn't a commitment to buy, but it is a commitment of time and attention. The due diligence process requires significant effort. By asking smart questions upfront, you can filter opportunities that don't fit your criteria before investing that time.
Most of these questions can be answered from the blind profile or a brief conversation with the broker, without requiring confidential information.
Financial Questions
- What is the revenue range? Most blind profiles provide a range (e.g., $1-2M). Make sure it fits your acquisition criteria.
- What is the cash flow or SDE range? This determines what you can afford and the likely asking price.
- Is the business growing, stable, or declining? Trends matter as much as current performance.
- What is the asking price and how was it determined? Understand the valuation basis before proceeding.
Operational Questions
- How many employees are there? Employee count affects complexity and your ability to manage.
- What is the owner's role? Some businesses require full-time owner involvement; others can be managed remotely.
- Is there a management team in place? Existing management reduces transition risk and owner dependence.
- What does the lease situation look like? Favorable lease terms are essential; unfavorable ones can be a deal-breaker.
Strategic Questions
- Why is the owner selling? Understanding motivation helps you assess the opportunity and negotiation dynamics.
- How long has the business been on the market? Extended time on market may indicate pricing or other issues.
- What is the competitive landscape? Understand where the business fits in its market.
- What are the growth opportunities? Is there room to expand, or is the market saturated?
Transaction Questions
- Is seller financing available? Many small business transactions include some seller financing.
- What is the expected timeline? Align expectations about how quickly the process can move.
- Will the owner provide training and transition support? Most deals include some transition period.
- Are there other interested parties? Know if you're in a competitive situation.
Red Flags to Watch For
Before signing an NDA, be alert to potential warning signs:
- Reluctance to provide basic information that should be in the blind profile
- Pressure to sign quickly without answering questions
- Inconsistent information or vague answers
- Asking price that seems disconnected from the financial profile
- Long time on market without clear explanation
After the NDA
Once you sign the NDA and receive detailed information, your due diligence really begins. You'll verify the financial information, assess operations, evaluate customers and employees, and determine whether the business fits your goals and capabilities.
But by asking the right questions upfront, you ensure that you're only investing that time in opportunities that have real potential to meet your acquisition criteria.
Working With a Buyer's Advisor
Many buyers benefit from working with an advisor who can help them evaluate opportunities, ask the right questions, and navigate the acquisition process. This is especially valuable for first-time buyers or those unfamiliar with the Wichita market.