Andrew Cagnetta bought his first business — a pasta shop in Wethersfield, Conn. — at age 25 and quickly realized he hadn’t done his homework thoroughly enough. Although he stuck to the shop’s original recipes and products, customers began complaining that the recipes had changed. Sales declined, and in less than two years, Cagnetta and his cousin, the co-owner, ended up selling the store.
They had bought the shop from two elderly women who had run it for years, not realizing how integral the previous owners had been to its success. “One question I should have asked [the previous owners] was what do they think drove people to the store?” Cagnetta says
He would never make that mistake again. 22 years later, he now owns Transworld Business Advisors in Fort Lauderdale, Fla., which helps buyers ask the right questions before buying a business. “There are no stupid questions,” Cagnetta says. “The more questions you ask, the less risk there will be.”
Where to begin? Here are 10 key questions to ask sellers before agreeing to buy their business.
What are your biggest challenges right now?
You want be aware of potential minefields, said Chet Walden, the late president and CEO of Walden Businesses, an Atlanta-based management and acquisitions firm. For example, if you’re buying a company that will need $1 million in capital improvements, he says, you need to learn that upfront while you’re still negotiating the purchase.
What would you have done differently?
This question can get the owner talking about opportunities he didn’t pursue but would have liked to, said Joe Bodine, CEO of American Business Masters & Investments Inc., an Overland Park, KS-based business brokerage firm. This question could help you learn how much growth potential the business offers — from untapped markets to additional product lines to new marketing opportunities.