Six questions every buyer asks before writing a cheque

What your business needs to be able to answer before a buyer ever enters the room

Every business owner who sells eventually reaches the same moment: a serious buyer sits across the table, and the conversation shifts from pleasantries to scrutiny. What happens next is not random. Buyers follow a predictable sequence of questions, each building on the last, each representing a potential exit point. Fail to answer any one of them convincingly, and the deal slows, retraces or collapses entirely.

The mistake most owners make is believing the process starts when the buyer arrives. It does not. The process starts the day you decide to sell, and the preparation you do before a buyer is ever introduced determines whether those six questions become a negotiation or a problem.

The stakes are larger than most owners realize

Canada is in the middle of an unprecedented ownership transition. According to the Canadian Federation of Independent Business, 76 per cent of small business owners plan to exit within the next decade, representing more than $2 trillion in business assets. Retirement is the primary driver for the majority of those exits. And yet, only one in 10 business owners has a formal succession plan in place.

That gap, between intention and preparation, is where value is lost. Businesses that are poorly prepared often face lower valuations, delayed closings, or deals that fall apart entirely. The research on why deals die confirms this. The single largest category of deal failures in 2025 was non-financial due diligence findings, accounting for 25.3 per cent of broken transactions. With money easier to raise, buyers are spending their attention on scrutiny. What they find determines the outcome.

Here are the six questions your business must be ready to answer, in the order buyers ask them.

1. Can we understand this business?

Before a buyer evaluates anything, they have to be able to follow the story. What does the company do? Who are its customers and how are they served? What drives revenue, and why has the business performed the way it has over time?

A well-prepared seller can answer these questions with a clear, concise information package that connects the history of the business to its current performance and its future potential. An unprepared seller hands over disorganized records and hopes the buyer can piece it together.

The test is not whether the business is complex. Many excellent businesses are complex. The test is whether the complexity has been explained. Buyers are disciplined. If they cannot develop a clear mental model of the business in the first stage of review, they move to the next opportunity rather than spend months getting educated at your expense.

Preparation at this stage means having a coherent narrative: a business overview, a description of the revenue model, a summary of the customer base, and an account of the key operational components. This is not marketing. It is documentation. The goal is to reduce the cognitive burden on a buyer reviewing your business alongside several others.

2. Can we trust the numbers as presented?

This is where most deals encounter their first serious obstacle. Sophisticated buyers go beyond reading financial statements. They analyze the quality of the reported numbers. Is revenue recurring or project-based? Are there off-balance-sheet liabilities that could crystallize post-closing? What is the quality of accounts receivable? How is inventory valued?

What buyers are looking for, and what their advisors are paid to find, is the difference between what the financials say and what the business actually earns. The standard measure is adjusted EBITDA: earnings before interest, taxes, depreciation, and amortization, with non-recurring and owner-specific expenses removed. A buyer cannot trust a number they cannot verify. And they will commission a Quality of Earnings report verifying it.

Sellers who prepare internally for the Quality of Earnings processes often avoid valuation surprises. Those who do not are negotiating from a position of uncertainty, and buyers price uncertainty in their favour.

The practical preparation here is straightforward, though rarely painless. Three years of reviewed or audited financials. A clear schedule of owner-specific expenses removed from EBITDA. Documentation of any one-time revenue events or costs. A reconciliation of cash reported to cash collected. If you cannot explain a line item, assume a buyer will ask about it because they will.

3. Can we finance the purchase of this business?

A buyer who loves your business still needs to fund the acquisition. This question is about capital structure and bankability, and it is more connected to your preparation than many owners understand.

Approximately 78 per cent of Canadian SME business purchases involve some form of external financing. Lenders do not make decisions based on the buyer's enthusiasm. They make decisions based on the quality and predictability of the cash flows they are lending against. That means clean financials, stable margins and documented recurring revenue matter to the lender as much as they matter to the buyer.

A business with three years of consistent adjusted EBITDA, a diversified customer base and documented recurring revenue is substantially easier to finance than one with volatile margins, a single dominant customer or revenues tied primarily to the owner's relationships. The latter creates lender uncertainty, which either increases the cost of financing or reduces the amount a buyer can raise, both of which suppress the price you receive.

Seller financing, where the vendor holds 10 to 20 per cent of the purchase price as a note, is commonly used in Canadian acquisitions and signals seller confidence while improving deal structure for both sides. It also partially transfers financing risk away from the buyer's lender, which can accelerate the process. Owners who understand this lever and are willing to use it responsibly often achieve better outcomes than those who insist on an all-cash close on day one.

4. Can we operate this business?

The question every buyer is eventually forced to confront is this: what happens to this business after the current owner leaves?

If the honest answer is that customer relationships, supplier relationships, key operational knowledge and institutional memory all walk out the door with the seller, the buyer is not acquiring a business. They are acquiring risk. The valuation reflects that.

Buyers focus on whether they have the skills to handle integration or will need new talent, and whether their systems are ready to absorb another business. But before that, they are asking whether the business they are acquiring can function without its founder.

Owner dependence is one of the most common value discounts in lower-middle-market transactions. It is also one of the most addressable, if you start early. The work involves documenting processes that currently live in your head, building a management layer that can operate independently, establishing direct customer relationships at the organizational rather than personal level, and demonstrating that the business performs when you step back.

None of this happens in the weeks before you go to market. It takes 12 to 24 months of deliberate effort. The owners who do it command premiums. The owners who skip it receive offers that include aggressive earnout provisions and extended transition requirements, both of which reduce the effective value they take home.

5. Can we create more value from this business once we own it?

Buyers are not purchasing your past. They are purchasing their future. The question at this stage is whether they can see a clear and credible path to growing what you have built once they control it.

This might be geographic expansion, new product lines, acquisition of competitors, operational improvements, or entry into market segments the current owner has not pursued. The more clearly a seller can articulate where the business could go and why it has not gone there yet, the more a buyer has to work with.

This is not the same as inflating projections. Buyers discount projections that cannot be traced to specific assumptions. What creates value at this stage is a frank and well-documented account of the market opportunity the business is positioned to capture: addressable customers not yet reached, services not yet offered, operational capacity not yet fully utilized.

Improving operational stability and documenting growth potential even modestly can have a meaningful impact on valuation multiples. The seller who has done this work before entering a process is not simply providing information. They are building the buyer's investment thesis, and a well-constructed investment thesis attracts more competitive offers.

6. Should we own this business?

This is the final and most personal question a buyer asks, and it is the one most sellers underestimate.

Every transaction ultimately comes down to conviction. A buyer who has worked through the first five questions and found satisfactory answers still has to decide whether this particular business, at this particular price, fits their strategy and their risk tolerance. That decision is part rational and part intuitive, and it is heavily influenced by the experience they have had dealing with you and your team throughout the process.

Sellers who are transparent, responsive, and organized throughout due diligence create confidence. Sellers who are slow to produce documents, inconsistent in their explanations or evasive about problems do the opposite. A seller who has not honestly decided to sell, or who has not aligned with co-owners and family before signing a letter of intent, is at risk of becoming a statistic in the category of deals that collapse after the LOI.

The answer to this question is built over the entire arc of the process, not at the end. It is a reflection of how you present your business, how you conduct yourself in negotiations, and how clearly you have demonstrated that the business is what you say it is.

What this means for you

These six questions are not a checklist. They are a cascade. A buyer who cannot answer question one never gets to question two. A business that fails on question two is repriced before question three. Each stage narrows the field and determines the terms.

The good news is that each of these questions is answerable. The work required to answer them is well-defined and, for most businesses, achievable with 12 to 36 months of focused preparation. The cost of not doing that work is not the absence of a deal. It is a worse deal, on worse terms, with a longer process and a smaller cheque at the end.

The most successful exits happen when owners begin preparing well before a transaction begins. That preparation starts with an honest assessment of where your business stands today against the six questions a buyer will eventually ask.

The owners who do that work before a buyer is in the room are the ones who get to answer those questions on their terms.

Karl E. Sigerist, Jr., ICD.D is the author of Selling Your Canadian Business: A Step-by-Step Guide to Maximizing Value and Securing Your Legacy, Founder of The Shaughnessy Group, a Toronto-based sell-side M&A advisory firm. Subscribe to The Canadian Exit Briefing, Canada's monthly newsletter for business owners planning their exit, at sellingyourcanadianbusiness.ca/subscribe.