- The seller's answer here matters less than whether it's consistent with everything else you learn.
- - How are financial statements prepared — internally, by a bookkeeper, or reviewed/audited by an accountant?
- - Is this a share sale or an asset sale, and why does the seller prefer that structure?
It is tempting to fall in love with a business — the location, the customer base, the story the seller tells about why they're moving on — and skip straight to talking price. That is exactly backwards. The questions you ask before you put an offer on paper decide how much due diligence work you save yourself later, and whether the deal is even worth pursuing.
None of this replaces a lawyer or an accountant. But a buyer who walks into a first conversation with the right questions gets better answers, spots red flags earlier, and negotiates from a stronger position once a letter of intent is on the table.
Start With Why the Business Is for Sale
The seller's answer here matters less than whether it's consistent with everything else you learn. Retirement, partner disputes, burnout, and relocation are all common and legitimate. Vague or shifting answers, or a reason that doesn't match declining numbers, are worth noting and revisiting later in due diligence.
Financial Questions to Ask Early
- How are financial statements prepared — internally, by a bookkeeper, or reviewed/audited by an accountant?
- What do the last two to three years of revenue and profit actually look like, and is the trend up, flat, or down?
- Are there any owner add-backs (personal expenses run through the business) that inflate the reported profit?
- What percentage of revenue comes from the largest few customers or clients?
- Are there any outstanding loans, lines of credit, or liens against the business's assets?
If a seller is reluctant to share financial statements before an offer, that's normal to a point — but it should not extend past a signed non-disclosure agreement or letter of intent.
Structural and Legal Questions
- Is this a share sale or an asset sale, and why does the seller prefer that structure? The two work very differently for tax, liability, and employees, and a seller's stated preference is a starting point for negotiation, not a fixed term.
- Is the corporation in good standing, with a clean minute book and up-to-date corporate filings?
- Are there any current or threatened lawsuits, regulatory complaints, or disputes involving the business?
- Does the business hold licences or permits that are personal to the current owner, or that transfer with the business itself?
Questions About Contracts and the Lease
- Is the business premises leased, and if so, does the lease permit assignment to a buyer, or does it require landlord consent?
- Are there major supplier or customer contracts, and do any of them contain change-of-control or assignment restrictions?
- Is the business operating under a name that is properly registered, and will you be able to continue using that name?
Questions About Employees
- How many employees are there, what is their length of service, and are any key employees planning to leave after a sale?
- Are there any outstanding employee claims, grievances, or ongoing leaves?
- Does the seller expect the buyer to offer employment to existing staff, and on what terms?
Whether employees' prior service counts toward their entitlements with a new employer depends on how the sale is structured and how quickly any offer of employment is made — this is a nuanced area under the Employment Standards Act, 2000 and worth raising with a lawyer before you commit to keeping (or not keeping) any staff member.
A Quick Reference: Categories to Cover Before You Offer
| Category | What you're checking for |
|---|---|
| Financials | Real, consistent profitability; no unexplained add-backs |
| Structure | Share vs. asset sale, and why |
| Legal | Litigation, licences, corporate standing |
| Lease | Assignability, remaining term, landlord consent |
| Contracts | Key customer/supplier terms, change-of-control clauses |
| Employees | Headcount, key-person risk, outstanding claims |
Frequently asked questions
Should I ask for financial statements before I sign anything?
Yes, at least a summary. A seller can reasonably ask for a signed confidentiality agreement first, but you should not make a serious offer based on financials you have never seen or that haven't been explained to you.
What if the seller won't answer some of these questions?
Note it and move carefully. Some sellers are simply private until a deal feels real; others are avoiding a question because the honest answer is unfavourable. A pattern of evasiveness across several questions is more telling than one guarded answer.
Do I need a lawyer involved this early, or just for the final agreement?
Involving a lawyer before you sign a letter of intent is worthwhile, because some LOI provisions — confidentiality, exclusivity — can bind you even though the price and most terms don't. It's easier to negotiate those terms upfront than to unwind them later.
Is it normal for a seller to want an offer before giving full details?
Sellers often want a non-binding indication of interest before opening their full books, since a business's financial details are sensitive. A preliminary offer subject to due diligence is a normal way to move a serious conversation forward without either side overcommitting.
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