Small Business Acquisition Checklist
Considering buying or selling a business? Be prepared, ask the tough questions and perform due dilligence. Here's a checklist for you to use:
Sales and Marketing
Reputation – Make sure your prospective business has a strong online reputation. Go online to yelp.com, Angieslist.com, social media sites and perform a search on Google to 
research online reviews and documented experiences of customers.
Website – 90% of consumers are going online first to perform research on products and services you sell, furnish, service or install. It is important that the prospective business you are considering purchasing has a finely tuned web presence. Get an assessment of the website business metrics including authority, traffic and conversion.
Lead Generation – Understand how the current business generates leads and how much they are spending against revenue production each month. Are they measuring what’s working and what’s not working in their marketing mix? Are there programs you will be able to replace, refine or enhance?
Sales Cycle – How many days does it typically take to on board a new customer? What are the stages in executing a sale?
Average Ticket – What is the average ticket a customer will spend with you? How does this pricing align itself with the market? Are there opportunities for you to maximize this amount?
Accounting and Systems
Cost to Acquire a Customer – How much does it typically cost to generate a new customer?
Customer Lifetime Value – How long does a customer typically remain a customer? How much is the relationship worth?
Recurring Revenue – I love businesses with a passive income stream. Does this business offer the opportunity to collect recurring revenue? If so, on what frequency?
Churn or Attrition – At what frequency do customers cancel? How often do I need to replace them?
Debt & Expenses– Request a copy of bank statements, P+L statements and accounts payables. Make sure you understand any debt and regular monthly expenses.
Cash – What is the cash position of the prospective business? How much do you have waiting for you in receivables? How much operating capital do you need at any given time to run the business?
Payroll – In any business payroll is typically the greatest expense. Understand how employees are motivated. Will you be retaining any of the existing staff? Are they going to be aligned with your revenue goals and business model? Can you make payroll more efficient?
Assets – What kind of capital equipment will you be inheriting? Are the assets fully depreciated?
Legal – Research the business and its owners for any legal issues, liens or pending litigation. Make sure you understand any existing contracts or obligations.
Systems – Are you investing in a business that can scale with technology? Does the business have processes in place in accounting, marketing, sales and operations? Take inventory of systems and software technology that makes it easier to run the business. Is it easy or hard to get key business reporting metrics?
Other Factors to Consider
Relationships – What is the current state of relationships with vendors, employees and customers? Does the business have any partners or strategic alliances that you will be able to leverage?
Competition- What does the competitive landscape look like?
Differentiation – How does the company differentiate itself in the competitive landscape?
About The Author: Steve Teneriello is the Founder of The Service Coach and is a seasoned senior marketing strategist and business development professional experienced in both residential and commercial sales and digital marketing. Throughout his career Steve has worked with over 300 small to medium-sized service business owners helping them develop and implement systematic and formula driven marketing, sales and operations strategies that fuel growth and profitability. Learn More About Steve
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