The best questions to ask a seller are specific, in writing and checkable against a document. Cover six areas: why they are selling, customers, staff and operations, the numbers, legal matters and licenses, and insurance and claims. This guide shows what a reassuring answer and a worrying answer sound like for each. It is for buyers with a serious lead and an early conversation scheduled, and for those already in diligence.
The short answer
- Short on time? Start with five: why now, the top ten customers and renewal dates, how each add-back was built, any open claims or unreported incidents, and whether any license is in the seller's name.
- A reassuring answer is specific and backed by a document. A worrying answer is vague, defensive or promises a document later that does not arrive.
- A seller's answer is generally not a contract promise. The statements that protect you are usually the representations and warranties (the seller's formal statements of fact) written into the purchase agreement, so ask counsel to turn key answers into them.
- Ask for loss runs and policies early. Insurance records are factual and come from third parties, and carriers can take days or weeks to issue loss runs, so ask as soon as you have a serious lead and a nondisclosure agreement.
- Write down each answer, verify it and bring the gaps to your accountant, attorney, lender and broker.
Why is the owner selling, and what happens after they leave?
Start here, because the answer shapes the rest. Retirement, a health event or a new opportunity are ordinary reasons. A business that is selling because something is about to go wrong looks different. Also ask what the owner plans to do next, since an owner who will start a competing business is a risk you would want to address in the purchase agreement.
| Ask | A reassuring answer sounds like | A worrying answer sounds like |
|---|---|---|
| Why are you selling, and why now? | A clear personal or business reason that fits the timeline and the facts | A reason that shifts between conversations, or a rush with no explanation |
| Have you tried to sell before, and what happened? | A straight account of earlier offers and why they ended | Offers that fell through at diligence, with no explanation |
| What will you do after the sale? | Retire, move or start something unrelated | Vague plans, or interest in the same industry |
| How long can you help with the transition? | A defined period with a named plan | Reluctance to help at all, or a promise to stay for years that the lender may not allow |
On the last row, if you use a U.S. Small Business Administration (SBA) 7(a) loan for an initial acquisition (a full change of ownership), the SBA rulebook (Standard Operating Procedure (SOP) 50 10 8.1, effective October 1, 2026) says the seller may not stay on as an officer, director, stockholder or employee. The business may hire the seller as a consultant for up to 24 months in total. This version applies to loans that receive an SBA loan number on or after October 1, 2026, so ask your lender which version applies to your file. Whether a non-compete can be enforced is a state law question, so ask your attorney. See when the seller stays on as a consultant.
Who are the customers, and will they stay after the owner leaves?
Revenue is only as good as the customers behind it. You are trying to learn how concentrated it is, how sticky it is and how much of it rests on the seller personally.
| Ask | A reassuring answer sounds like | A worrying answer sounds like |
|---|---|---|
| Who are your top ten customers, and how long have they been with you? | A list with revenue by customer and long relationships | Reluctance to share until late, or one account that dwarfs the rest |
| Which customer contracts are in writing, and when do they renew? | Written contracts with renewal dates you can read | Handshake deals for the largest accounts |
| Do any contracts need consent to transfer or have change of control clauses? | A list of them and a willingness to ask for consent | "I don't think so," with no one having checked |
| Which customers know you personally, and have you told any of them about the sale? | A plan to introduce you to key accounts at the right time | Customers who buy only because of the owner, with no plan to introduce you |
Who really runs this place day to day?
People and equipment are what you inherit on day one. Ask who matters, what is broken or deferred and what runs through the owner's personal accounts.
| Ask | A reassuring answer sounds like | A worrying answer sounds like |
|---|---|---|
| Which employees could you not run the business without, and are any planning to leave? | Named people, their roles and a sense of how they feel about the sale | "Everyone is loyal," or key staff who have not been told |
| How is everyone paid, and are any workers treated as contractors? | Payroll records that match the people who work there, with clear contractor agreements | Cash payments, informal arrangements or contractors who work like employees |
| What equipment, vehicles or systems need replacing soon? | A maintenance record and a realistic list | No records, or "it all runs fine" for aging equipment |
| What runs on your personal accounts: phone numbers, domain names, software logins, vendor accounts? | A list that can be moved to the new owner | Key systems that exist only in the seller's name |
| What do customers complain about, and what warranty, rework or unfinished jobs are open? | A complaint log, a list of open jobs and a plan for each | No records, or work the seller has promised but not priced |
Pay practices matter for insurance too. Pay to subcontractors who do not carry their own workers' compensation can be added to your premium base at audit, and workers who look like employees may be reclassified. See 1099 contractors and your first workers' comp audit.
Can I trust the numbers?
Ask the seller to explain the numbers, not just hand them over. Your accountant will test them. The questions below find out whether the seller understands how the earnings were built. For the technique, see reading financial statements before you buy a business.
| Ask | A reassuring answer sounds like | A worrying answer sounds like |
|---|---|---|
| How did you calculate the earnings you are asking me to pay for? | A walk through each adjustment with a bill, payroll record or receipt | Large add-backs with no support, or "my business broker did that" |
| Do bank deposits match reported revenue? | A reconciliation, with differences explained | Cash sales not in the books, or deposits that do not tie to the statements |
| What expenses does the business pay that are personal? | A short, documented list | A long list that changes when pressed |
| How much working capital does the business need, and when is it tight? | Monthly figures that show seasonal swings | No idea, or a stretch in payables that cash flow depends on |
Working capital is a deal term. See working capital and the peg explained.
What could a lawyer, a landlord or a licensing board stop?
Your attorney will do the formal review, but the seller usually knows where the problems are. Ask these questions early.
| Ask | A reassuring answer sounds like | A worrying answer sounds like |
|---|---|---|
| Is there any lawsuit, demand letter, regulatory inspection or dispute, pending or threatened? | A full list, including small matters and how each was handled | "Nothing serious" with no list |
| Which licenses and permits does the business need, and who holds each one? | A list with holders and renewal dates, including any held by the seller personally | Licenses held by one person who is leaving, or lapsed renewals |
| What does the lease say about transfer, rent changes and insurance? | A lease you can read, with the landlord open to assignment | No written lease, or a landlord who has not been approached |
| What liens, loans, leases or personal pledges exist? | A schedule matched to public records | Debts that appear later, or pledges the seller expects you to take over |
| Are all payroll, sales and income tax returns filed and paid, and have you received any notice from a tax agency? | Filed returns with payment records, and a clear account of any notice and how it was resolved | Late or missing filings, a payment plan nobody mentioned, or payroll taxes that are behind |
Ask your accountant and attorney how unpaid taxes can follow a buyer in your state. Licenses vary by trade and state, and some do not transfer. See licenses, permits and registrations when buying a business. Written answers help, but the statements you can most clearly rely on are the representations and warranties written into the purchase agreement, and the seller may list exceptions in disclosure schedules. Whether anything said outside the contract gives you a remedy is a question for your attorney.
What claims and insurance history am I inheriting?
Insurance answers are easier to verify than most, because carriers hold the records, though loss runs show only claims that were reported. They also tell you how the seller ran the business: how many claims, how they were handled and whether the coverage fits the work. Frame the questions as fit for the new owner. The seller's broker may have done a fine job, and your goal is to learn what you are inheriting.
| Ask | A reassuring answer sounds like | A worrying answer sounds like |
|---|---|---|
| Can I see every policy with its endorsements, and a schedule of carriers, limits, deductibles and premiums? | Complete documents, quickly | Only summary pages, or "my insurance broker handles that" with no follow-through |
| Can I see loss runs for the last several years and a list of open claims? | Carrier-issued loss runs and a clear account of each open claim | "We never have claims" with no loss runs, or claims handled privately and never reported |
| Has any policy been cancelled, non-renewed or declined, and why? | A direct answer with the paperwork | A change of carriers every year with no explanation |
| Do any of your policies only cover claims made while the policy is active, and do you know the earliest coverage date on each? | A list of which policies are which, with the earliest coverage dates and the broker's contact | Not knowing the difference, or no one to ask |
| What do your customer contracts and lease require for insurance, and have you issued certificates? | A list of requirements and certificates on file | Contracts the policies do not satisfy |
| Any workers' compensation audits open, premium financing or unpaid balances? | A short list with amounts and dates | Surprises that appear after closing |
Learn what each document shows in how to read loss runs, and see occurrence vs claims-made. A claims-made policy generally responds to claims first made and reported while it is in force, for work after its retroactive date (the earliest date of work it covers). Who covers old work therefore depends on the deal, the retroactive date and any extended reporting period. See prior acts and tail coverage after an acquisition. If the loss runs or policies raise questions, Morrow can review what you inherited and flag gaps, though the policy wording and the carrier decide coverage. The insurance checklist for buying a business lists every document to request.
How do you ask, and what do you do with the answers?
- Ask in writing, and in stages. A first call for the reason for selling and the big picture, then a written list after a nondisclosure agreement, then follow-ups as diligence opens.
- Verify each answer against a document. Bank statements for revenue, loss runs for claims, the lease for the lease.
- Keep a log. Note the question, the answer, the document that backs it and what is still open.
- Turn important answers into contract terms. Ask counsel which should become representations, closing conditions or specific indemnities.
- Share findings with your advisors. Your accountant, attorney, lender and broker each see a different slice.
A hypothetical example. A seller says the business has had no claims in ten years. Loss runs from the two carriers show two small closed claims, so the buyer follows up: were there any incidents the seller paid for directly? The answer is yes, a customer property damage claim last year, paid out of pocket for $8,000.
The buyer asks counsel to add a representation that all incidents have been disclosed, and asks the insurance broker whether any open exposure remains. The first answer was incomplete, and the follow-up turned it into a documented fact.
For what a seller's answers may mean, see red flags when buying a business, which covers how to respond to each warning sign. For the full workstream, see the due diligence checklist.
Keep reading
- Red Flags When Buying a Business
- Due Diligence Checklist for Buying a Small Business
- What Is a Letter of Intent When Buying a Business?
- How to Read Loss Runs After You Buy a Business
- Seller Indemnities vs Insurance: What They Are Really Worth
- All guides for new business owners
Frequently asked questions
What is the first question to ask a seller?
Ask why they are selling and why now. The answer tells you what the owner expects after closing, how urgent the sale is and which topics to dig into next. Follow it with questions about customers, staff, the numbers, contracts and claims.
How do I know if a seller is telling the truth?
Check each answer against a document: bank statements for revenue, loss runs for claims, the lease, license records and customer contracts. A reassuring answer is specific and backed by paper. A worrying one is vague or relies on a document that never arrives.
Should I ask a seller about insurance claims?
Yes. Ask for carrier-issued loss runs, a list of open claims and any incidents the seller paid for directly. Insurance records are factual and come from third parties, and they show how the business handled problems.
Are a seller's answers legally binding?
Not by themselves. Statements in conversation or an email may not give you a remedy. Statements written into the purchase agreement as representations and warranties usually do, subject to any exceptions the seller lists in the disclosure schedules (the attachments to the agreement). Ask your attorney which answers to put in the contract and what other remedies may exist.
Can I ask a seller to introduce me to customers and employees?
Often, but timing and consent matter. Sellers usually want confidentiality until the deal is likely to close, so buyers commonly meet key customers and staff late in diligence, with the seller's agreement.
References
- U.S. Small Business Administration: Buy an existing business or franchise
- U.S. Small Business Administration: SOP 50 10 8.1, Appendix 15, change of ownership (effective October 1, 2026)
- Morgan & Westfield: Acquired, Ch. 21, 4 Types of Due Diligence (sell-side advisory firm, 2026)
- Morgan & Westfield: Acquired, Ch. 22, Reps and Warranties (sell-side advisory firm, 2026)
Just bought a business? Get your insurance reviewed.
Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.
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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.