You Found a Business for Sale. What Do You Ask Next?

# You Found a Business for Sale. What Do You Ask Next?

Maybe you saw it on a business-for-sale website. Maybe somebody posted it in a Facebook group between a used lawn mower and a suspiciously cheap boat. Maybe there is a handwritten sign in the window.

The listing says the business is profitable. The owner is retiring. The opportunity is "turnkey."

And that may be true. You simply do not know enough yet.

Your first job is not to decide whether to buy the business. It is to learn enough to decide whether the next conversation is worth having.

Start with the basic shape of the business

You do not need to begin by demanding tax returns from a stranger. Start with a short, normal conversation.

You might say:

I am interested, but I am still learning how the business works. Could you walk me through what is being sold, what the owner does, and the basic financial picture?

Then try to answer these questions:

• What does the business sell, and who buys it?
• Why is the owner selling?
• How long has the business operated?
• What is included in the asking price?
• Is the property included, leased, or neither?
• What does the owner personally do during a normal week?
• How many employees are there, and what do they do?
• What were sales and owner earnings during each of the last three years?
• How did the seller arrive at the asking price?
• Is the seller open to helping with the transition or financing part of the purchase?

You are not conducting due diligence yet. You are trying to understand what kind of opportunity is being described.

Ask what the numbers actually mean

Listings have a habit of using financial words loosely. "The business makes $300,000" could mean $300,000 in sales, gross profit, net income, or money the owner says was available to them.

Those are very different numbers.

Ask the seller or broker to label each figure:

• Annual sales: everything customers paid the business
• Net income: profit after the expenses shown on the financial statements
• Owner earnings or SDE: net income adjusted for one owner's compensation and certain claimed expenses or one-time costs
• Asking price: the amount requested for the business assets or ownership interest

If SDE is new to you, read our plain-English explanation of seller's discretionary earnings. For now, the important question is simple: "How did you calculate that number?"

A seller who says SDE is $200,000 should be able to show a calculation that begins with reported profit and identifies every adjustment. You do not have to agree with those adjustments just because they appear in a spreadsheet.

Get enough information for a first screen

The free Acquisition Quest calculator is designed for this early stage. It does not prove that a business is good. It helps you see which assumptions deserve another question.

The most useful starting inputs are:

• Asking price
• Annual sales
• SDE or another clearly identified earnings figure
• Cash you could reasonably invest
• A rough interest rate and loan term, if borrowing is likely
• Seller-financing amount and terms, if offered
• Working capital or immediate repairs you may need after closing

Do not know every field? Use the information you have and label estimates as estimates. Then change one assumption at a time.

What happens if verified earnings are 15% lower than advertised? What if you need more cash at closing? What if the equipment needs $40,000 of work? A useful first screen does not predict the future. It shows you where the deal becomes uncomfortable.

If the opportunity still looks plausible, the full Decision Report can help examine financing, price support, owner cash, downside scenarios, and the records worth requesting next. That deeper report is most useful after you have a real opportunity and enough information to avoid feeding it pure guesswork.

What if the seller will not share everything?

Early in the conversation, some limits are reasonable. The seller may protect customer names, employee details, trade secrets, or sensitive records until you sign a confidentiality agreement and demonstrate that you are a credible buyer.

There is still a difference between not yet and not available.

If information is withheld, ask:

• Does the record exist?
• What can be shared now with names or sensitive details removed?
• What will be available after a confidentiality agreement or accepted offer?
• Who prepared the numbers?
• Can the totals eventually be compared with tax returns, bank deposits, point-of-sale reports, or other source records?

A calm answer and a reasonable path to verification are useful. Constantly changing explanations are useful too, just in a different way.

Keep three headings in your notes: supported fact, seller claim, and still unknown. It is one of the easiest ways to stop an enthusiastic conversation from becoming a "fact" in your spreadsheet.

What about cash-heavy businesses with poor records?

Car washes, laundromats, restaurants, vending routes, salons, parking operations, and other businesses may collect a meaningful amount of cash. Cash itself is not the problem. Records that cannot show where the cash came from are the problem.

"The tax return does not show everything" is not extra earnings you can safely count. It is an unverified claim.

Look for evidence created by the operation itself:

• Bank deposit history
• Point-of-sale or card-processor reports
• Daily collection logs
• Machine counters or card-system records
• Sales-tax filings
• Utility usage
• Inventory purchases
• Payroll records
• Customer invoices, route logs, or appointment systems

No single item tells the whole story. Together, records may help show whether the claimed activity is plausible and whether the financial statements are consistent with the way the business actually operates.

Take a laundromat as an example. Water and electricity usage, machine counts, card-system reports, repair history, and collection logs can help you understand activity. They do not magically turn undocumented cash into verified profit, but they give you something more useful than "trust me, the machines stay busy."

Weak records change the deal

Poor records do not automatically mean the business is worthless. They do mean you have less certainty.

That uncertainty can affect:

• Value: You may be unwilling to pay for earnings that cannot be supported.
• Financing: A lender may ask for more evidence, give little or no credit to unverifiable income, lend less, or decline the request. Requirements vary by lender and loan program.
• Deal structure: More of the price may need to depend on seller financing, a holdback, an earnout, or some other protection drafted with professional help.
• Your cash needs: If borrowing becomes harder, you may need more money at closing and more working capital afterward.
• Your risk after closing: Weak books make it harder to set a budget, spot theft or waste, file accurate returns, and know whether the business is improving.

This is where excitement needs a little adult supervision. Do not solve missing evidence by typing the seller's best-case number into a calculator and admiring the result. Run the supported number first. If the seller later proves more earnings, you can update the analysis.

A respectful way to push for clarity

You do not need to interrogate the seller. Try language like this:

I understand that some information is confidential. I am not asking you to disclose customer names right now. I do need to understand which earnings can eventually be supported and what records will be available to verify them.

Or:

The opportunity may still work, but I cannot value or finance income that I cannot document. Can we separate the earnings shown in the records from the additional amount you believe the business produces?

That is direct without being accusatory. A serious buyer asks for evidence because the buyer will inherit the consequences.

When the first conversation goes well

If the basic story makes sense, the next step is a preliminary document review, not a victory lap.

Ask for tax returns, financial statements, the seller's SDE calculation, current operating results, and records specific to the business. Our guide to what to request before spending money on full due diligence lays out a practical first package.

Then return to the Acquisition Quest calculator with better numbers. Compare the seller's case with a more conservative case. Look at the estimated loan payment and debt-service coverage. Account for cash needed beyond the purchase price.

You do not need to know everything before making the first call. You need a repeatable way to turn an interesting sign, post, or listing into better questions.

That is how buyers get better at this: one conversation, one supported number, and one sensible next step at a time.

Sources and further reading

• SBA: Planning and financial-information guidance
• SBA: Guidance on records and access to funding
• IRS: Recording business transactions
• Acquisition Quest: What to request before due diligence

Acquisition Quest note: This lesson is educational, not lending, legal, tax, accounting, valuation, or investment advice. Records, financing requirements, and appropriate deal protections vary by business, lender, location, and transaction. Verify material claims with qualified professionals before making a binding commitment.