Before making an offer on a business, check the seller's identity, the listing claims, the financial basis for the price, what is actually included in the sale, the lease and staff position, and whether there are any red flags that suggest full due diligence is not yet warranted.
Quick Answer: What should you check before making an offer on a business?
Before making an offer, you should verify the seller's identity and authority to sell, review the listing claims critically, check the company on Companies House if it is a limited company, understand what the asking price is based on, ask enough financial questions to know whether the numbers are plausible, and confirm what is included in the sale — assets, lease, staff, stock and goodwill.
You do not need to complete full due diligence before making an offer. But you do need to know enough to make a conditional offer that is based on reality — not on claims you have not yet tested. An offer should always be made subject to due diligence, satisfactory accounts review, legal review and any other conditions specific to the deal.
Making an unconditional offer before you have done basic checks puts you in a weak negotiating position and exposes you to risk. A few hours of preliminary research before you offer can save significant time, money and stress later.
Contents
Why pre-offer checks matter
Making an offer on a business is not a trivial step. Even a conditional offer signals commitment — to the seller, to any advisers involved and potentially in the context of any heads of terms that follow. An offer made on the basis of incomplete or unverified information can lead to wasted professional fees, lost time, reputational embarrassment if a deal collapses badly, and occasionally financial exposure if deposits or exclusivity arrangements are involved.
The goal of pre-offer checks is not to replicate full due diligence. It is to answer three questions: Does this business appear to be real and legitimate? Are the headline claims broadly plausible? Is this worth spending time and professional fees on?
If the answer to all three is yes, you make a conditional offer and begin the proper due diligence process. If the answer to any of them is clearly no, you either ask more questions before offering or walk away.
Pre-offer checks typically take a few hours and cost nothing beyond your own time. Full due diligence — accountant reviews, legal searches, lease review, staff checks — can cost several thousand pounds. Doing the basics first is simply sensible risk management.
Check the listing
Start with the listing itself. Read it carefully and critically — not as a buyer hoping to find a good business, but as a sceptic looking for claims that need to be tested.
Ask yourself:
Is the business clearly described?Does the listing tell you what type of business it is, where it trades, what products or services it sells, and who its customers are? Vague listings that avoid specifics can be a sign that there is something the seller does not want to highlight.
Is the asking price stated, and is a basis given?A listing should tell you the asking price and, at minimum, whether it includes stock, what profit the price is based on, and whether the business is profitable. If the price is given without any context, ask why.
What is the stated profit?Is it turnover, net profit, adjusted EBITDA, or something else? These are very different figures. Always confirm which one is being quoted. "Making £100,000" could mean £100,000 turnover (before any costs) or £100,000 net profit — a very large difference.
What is the reason for sale?Retirement, health reasons and relocation are common and generally credible. Unusual or evasive reasons — or no reason given — are worth probing.
What is included?Does the listing specify whether stock, equipment, goodwill, the lease and staff are included? The absence of this information is not unusual at listing stage, but you need to establish it before making any offer.
Does the listing make any claims that seem implausible?High profit margins, very large turnovers for a small business, claims of minimal owner involvement combined with high income, or rapidly growing revenue without explanation — any of these deserve scrutiny.
A good listing is not automatically trustworthy, and a poor-quality listing does not automatically mean a bad business. But the listing is your first data point, and reading it carefully sets the right frame of mind for everything that follows.
Check the seller
Before you invest any significant time or money in a business, you should have a reasonable level of confidence that you are dealing with a genuine person who has the right to sell the business they are presenting.
Verify the seller's identity.This does not mean demanding a passport in the first message. It means making sure the seller is a real person, their contact details are consistent, and what they say about their role checks out. A seller who is unwilling to confirm basic identity details — name, location, how long they have owned the business — should be treated with caution.
Confirm authority to sell.Ask directly: are you the owner? If it is a limited company, are you a director, and do you have authority to sell the company's assets or shares? If there are multiple directors or shareholders, do all relevant parties agree to the sale? A business that is jointly owned requires all owners to agree — a problem that can derail deals late in the process if not identified early.
Check whether the seller is who they say they are.For limited companies, you can verify director names on Companies House. For sole traders, the connection between the seller and the business may be harder to verify formally, but basic online searches, LinkedIn presence and the consistency of the seller's story all matter.
Consider an NDA.Before providing significant financial information about the business, most sellers — and their advisers — will ask buyers to sign a non-disclosure agreement. This is standard and sensible. As a buyer, you should also be aware that your contact details and interest in the business are data the seller holds. Review the site's privacy policy and consider whether any NDA you are asked to sign is proportionate.
Use Companies House
If the business is operated through a limited company, Companies House is an invaluable free resource that every buyer should use before making an offer.
At Companies House you can check:
Current directors and shareholders.Confirm who is listed as a director of the company. Compare this with who you are dealing with. If the seller claims to be the owner but is not listed as a director, ask why.
Filing history.Has the company filed its accounts and confirmation statements on time? Persistent late filing can indicate poor administration.
Abbreviated or full accounts.Even abbreviated accounts — which small companies are allowed to file — will show the balance sheet. You can check retained earnings (or losses), whether the company has significant liabilities, and whether the balance sheet position is broadly consistent with the seller's claims.
Mortgage charges.Companies House shows any charges registered against the company — these are effectively security interests held by lenders. If there is a charge registered, ask what it relates to and whether it will be discharged before completion.
Previous names.If the company has changed its name, that may be innocuous — or it may be worth understanding why.
Insolvency and dissolution history.Companies House records whether a company has been subject to insolvency proceedings. You can also check whether the seller's current or previous companies have been dissolved, liquidated or subject to creditor actions.
Officer history.You can see previous directors and when they resigned. A high turnover of directors can be a flag worth investigating.
Companies House is a starting point, not a complete picture. Many issues — tax liabilities, HMRC disputes, off-balance-sheet commitments — will not appear there. But it gives you free, publicly available information that takes minutes to access and can immediately highlight problems.
Check the price basis
Before making an offer you need to understand what the asking price is actually based on. Many buyers make offers without asking this question, which means they have no way to assess whether the price is fair.
Common bases for small business asking prices include:
Profit multiple.The most common basis for ongoing businesses. The seller states the annual profit (usually adjusted EBITDA or net profit) and applies a multiple — typically between 2x and 4x for most small UK businesses, though this varies significantly by sector, size and risk profile. Ask what profit figure the multiple is applied to, and what the multiple is.
Asset value.For businesses where profitability is limited or unproven, the price may be based primarily on the value of tangible assets — equipment, stock, fixtures and fittings. This is common for start-ups, businesses with declining revenue or those in turnaround situations.
Revenue multiple.Less common for small businesses, but sometimes used in certain sectors. Be cautious — revenue does not equal profit, and paying a multiple of revenue without understanding the margin can be misleading.
Goodwill plus assets.Many listings present the price as a combination of goodwill (the intangible value of the customer base, brand and trading position) plus the tangible asset value. Ask how each element has been calculated.
Comparable transactions.Sellers sometimes justify a price by reference to what similar businesses have sold for. This can be a reasonable approach, but ask for the evidence — comparable transactions in your sector and at your scale.
Once you understand the basis, you can begin to assess whether it is credible. If a business is priced at 3x adjusted EBITDA of £100,000, that is a £300,000 asking price. Is the claimed £100,000 EBITDA believable? Is 3x the right multiple for this type of business in this sector? These are the questions your accountant can help you answer.
Ask financial questions
You do not need to see three years of accounts before making an offer — but you do need to have asked enough financial questions to know whether the listing claims are broadly plausible.
Essential pre-offer financial questions:
What is the turnover for the last financial year, and for the year before that?
What is the net profit, and how has it been calculated?
Is there an adjusted profit figure, and what add-backs have been applied?
What salary does the owner pay themselves, and is it included in or excluded from the profit calculation?
Are there any loans, finance agreements or HMRC liabilities?
Is the business VAT registered?
Has tax been filed and paid up to date?
Are there any outstanding HMRC enquiries or payment plans?
Has recent trading changed significantly from the last set of filed accounts?
What are the main costs, and are there any significant cost increases on the horizon?
You will not get full answers to all of these before you have signed an NDA and the seller has agreed to share detailed information. But you should be able to get at least headline answers. A seller who refuses to give any financial information before an offer is made — and will not even confirm the broad basis for the asking price — is making it impossible for you to make a rational decision.
If the answers are consistent with the listing, that does not mean the numbers are right — it means they are at least plausible, and worth investigating further. If the answers contradict the listing, you have important information before committing any money.
Check assets and lease
Before you offer, establish clearly what you would actually be buying. This is more complex than it sounds, because different business sales include very different combinations of assets and obligations.
Physical assets.What equipment, vehicles, fixtures, fittings and tools are included? Are there any items that are leased rather than owned — for example, coffee machines, card payment terminals, photocopiers or vehicles on hire purchase? Leased assets transfer with conditions; owned assets transfer outright.
Stock.Is stock included in the price, and at what value? This is particularly important for retail, food and wholesale businesses where stock can be a significant proportion of the total value.
The lease.Does the business trade from leased premises? If so, is the lease assignable, how long does it have left, what is the rent, and does the landlord need to consent to the transfer? A business whose lease cannot be assigned — or whose landlord refuses consent — cannot easily be sold in its current form.
Intellectual property.Does the business own trademarks, domain names, social media accounts, proprietary software or other IP? Are these properly registered in the company's name, or in the seller's personal name?
Customer contracts.Are there customer contracts, and do they contain any change-of-control provisions that would allow customers to exit if the business is sold?
Goodwill.Is the goodwill primarily business goodwill (attached to the brand and trading name) or personal goodwill (attached to the seller individually)?
Getting clear on what is included before you offer prevents misunderstandings later and ensures your offer reflects the actual value of what you are acquiring.
Check staff and employment
Staff are not just a cost — they are often the operational core of a small business. Understanding the employment position before you offer is important both for continuity planning and for assessing risk.
Under TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006), staff employed in the business at the time of an asset purchase will generally transfer to you automatically, on their existing terms and conditions. You cannot simply dismiss them because a new owner has taken over. This protection is a legal right and applies to most business purchases structured as asset transfers.
Before making an offer, ask:
How many staff are employed, and what are their roles?
Are there any part-time, casual or zero-hours contract employees?
What are the rough salary levels?
Are there any long-serving employees with significant statutory rights?
Are there any ongoing HR issues, grievances or employment tribunal claims?
Are all staff on proper employment contracts?
Are staff aware the business is for sale, or does the seller want this kept confidential for now?
Are key members of staff likely to stay after the sale?
Staff who do not want to stay — or who leave when they learn about the sale — can significantly affect the business's ability to trade normally through and after the transition. Understanding the people risk early is important.
Red flags to watch for
Certain situations in the pre-offer stage should prompt you to slow down and ask more questions before committing to anything. Common red flags include:
Identity cannot be confirmed.The seller is unwilling to provide basic personal information or confirm their role in the business.
Authority to sell is unclear.Multiple owners or shareholders exist and not all are clearly on board.
Listing claims are inconsistent with Companies House data.Filed accounts show losses or a very different turnover to what is claimed in the listing.
The seller cannot explain the basis for the asking price.They simply state a number without being able to say what profit it is based on or what multiple is being applied.
Significant add-backs with no detail.Adjusted profit is substantially higher than reported profit, but the seller will not itemise what has been added back.
Pressure to offer quickly.The seller says there are other interested buyers and you must offer today, without giving you time for basic checks.
The listing makes implausible claims.Profit margins that are far above industry norms, very high turnover for a very small business, or claims of minimal management effort combined with substantial income.
No accounts are available and no explanation is given.
The lease situation is unclear or the landlord is described as "difficult."
The seller cannot name the staff or confirm their employment status.
The price keeps changing.Different figures appear in different conversations or documents.
The seller discourages the use of professional advisers.
Any one of these may have an innocent explanation. Several together are a reason to be very cautious before spending money on professional due diligence or committing to heads of terms.
Make conditional offers
An offer on a business should almost always be conditional. Making an unconditional offer before you have reviewed accounts, the lease, staff contracts and the legal position is extraordinarily risky — and it removes your ability to renegotiate if problems emerge during due diligence.
Standard conditions attached to a business purchase offer include:
Subject to satisfactory review of accounts and financial records
Subject to satisfactory legal due diligence
Subject to satisfactory review of the lease and confirmation of landlord consent
Subject to obtaining satisfactory finance (if you are borrowing to fund the purchase)
Subject to review of staff and employment contracts
Subject to any required regulatory approvals or licence transfers
Subject to no material change in the business between the date of the offer and completion
These conditions should be stated clearly in any heads of terms or letter of intent. They give you the right to renegotiate or withdraw if due diligence reveals material problems — without losing your deposit or facing a breach of contract claim.
Heads of terms (sometimes called a letter of intent or memorandum of understanding) are typically non-binding — they record the agreed commercial terms but do not create a legally enforceable contract to buy or sell. The binding contract comes later, in the form of the sale and purchase agreement drafted by solicitors. However, exclusivity clauses and confidentiality provisions in heads of terms can be binding even when the rest is not — so always have a solicitor review them before you sign.
Pre-offer checklist
Use this checklist before making any offer:
Listing reviewed and claims noted for testing
Reason for sale confirmed and assessed as credible
Seller identity confirmed
Seller's authority to sell confirmed
Companies House checked (directors, accounts, charges, insolvency) if limited company
Headline financial figures obtained — turnover, profit, add-backs
Price basis understood — what multiple of what profit figure
What is included in the sale confirmed — assets, stock, goodwill, lease, staff
Lease position understood — term remaining, assignability, rent
Staff and TUPE position understood at a high level
Any obvious red flags reviewed and considered
Professional advisers (solicitor and accountant) identified and ready to instruct
Offer drafted as conditional — conditions clearly stated
NDA signed if required before financial information is shared
FAQs
Should I get professional advice before making an offer?
Yes. Even at the pre-offer stage, a brief conversation with a solicitor and accountant familiar with business acquisitions can save you from making obvious mistakes. You do not need to commission a full due diligence report before offering — but having advisers identified and available from the start means the process moves faster once an offer is accepted.
Should I sign an NDA before receiving financial information?
Usually yes. Sellers reasonably want to protect sensitive financial information — customer names, supplier terms, profitability — from being disclosed to competitors or tyre-kickers. An NDA protects both parties. Read any NDA carefully before signing, and be aware that some NDAs include non-solicitation clauses that prevent you from approaching the seller's staff or customers for a period after the process ends.
Should I share sensitive documents about myself early?
Be thoughtful. As a buyer, you may be asked to provide proof of funds, a brief personal or business biography, or references. This is reasonable — sellers need to know they are dealing with a credible buyer. However, you should not provide detailed personal financial information or bank statements to a seller you have not yet verified as legitimate.
How do I know if the asking price is fair?
Start by understanding the basis — what profit figure the price is based on and what multiple is applied. Then ask your accountant whether the profit figure is realistic and whether the multiple is appropriate for the sector, size and risk profile of the business. Business valuation is not an exact science, but a qualified professional can give you a credible view on whether you are in the right range.
What if the seller will not provide any information before I make an offer?
A seller who refuses to share any financial information — even headline turnover and profit — before receiving an offer is making it impossible for you to make a rational decision. You can either walk away or make an offer that explicitly states it is based on the assumption that the business generates a specified level of profit, and that any material difference will allow you to withdraw or renegotiate. Be very cautious about proceeding with any seller who is fundamentally unwilling to be transparent.
Key takeaways
Pre-offer checks protect your time and money.A few hours of basic research before offering can save significant professional fees spent on due diligence for a deal that should never have progressed.
Verify the seller's identity and authority to sell.Do not assume the person you are speaking to has the right to sell the business.
Use Companies House for free, publicly available information.It takes minutes and can reveal serious issues before you invest any further.
Understand the price basis before offering.Knowing what profit the asking price is based on, and what multiple is applied, gives you the foundation for a rational assessment.
Always make your offer conditional.Conditions protect your right to renegotiate or withdraw if due diligence reveals problems.
Red flags are not dealbreakers — but they demand answers.If something does not add up, ask the question before spending money.
Related resources
Important disclaimer
Buy a Business Ltd is a marketplace, not a broker, corporate finance adviser, M&A adviser, law firm, accountant, tax adviser, lender, valuation firm, surveyor, insolvency practitioner or investment adviser. Information, guides, checklists and examples on this site are for general guidance only and do not constitute legal, tax, financial, investment, lending, valuation, property, employment, data protection, brokerage, corporate finance, M&A or regulated advice.
Buying a business involves risk. You should seek independent professional advice before making an offer, paying money, signing documents, taking over a lease, employing staff, relying on accounts or completing a business purchase.
Sources and useful references
Companies House / GOV.UK: Get information about a company
GOV.UK: Business transfers, takeovers and TUPE
Acas: What a TUPE transfer is
ICO: Data protection guidance for businesses
GOV.UK: Avoid and report internet scams and phishing