The 20 Questions That Reveal the Truth
How to validate the purchase price before you spend a dime on legal fees.
The most dangerous person in a deal isn’t a bad seller. It’s a prepared one.
They have cleaned the books. Rehearsed the story. And worked with a broker to explain away every “weird” number.
So if you rely only on financials, you’re already behind.
Because you won’t find:
personal expenses
key man risk
deferred maintenance
customer concentration
cash flow stress
…listed cleanly on an income statement.
You have to ask for them.
Over time, I built a simple interview script I use in the very first management meeting. These 20 questions surface most deal killers in under 60 minutes.
Here’s the framework. Print this out. Take it to your next meeting.
Category 1: The "Swiss Army Knife" Trap
The Insight: Most small business owners don't realize how much they actually do. They call it "oversight"; I call it "Shadow Payroll." If the owner is secretly handling IT, HR, and Sales, you aren't buying a business, you are buying a job that will cost you $150k/year to replace. You need to identify these "phantom roles" immediately.
The Questions:
1. Walk me through a typical Tuesday. What is the first thing you do when you wake up, and the last thing you do before bed? (If they say "check email" or "put out fires," they are an operator, not an owner.)
2. Who is the first person the alarm company calls at 2:00 AM? (If it’s the owner, maybe the business cannot run without them.)
3. If you had to fire your bottom 20% of staff today, who would pick up their slack? (If the answer is "Me," the team has no capacity.)
4. Who manages the CRM and IT passwords? (Looking for hidden System Admin roles.)
Category 2: The "Inflation Mask" Trap
The Insight: In the current inflationary environment, Revenue Growth is a vanity metric. I have seen countless businesses where revenue is up 15%, but unit volume is down 5%. That means the customer base is shrinking, and the owner is just taxing the survivors to hide the bleed. When the price hikes stop working, the business collapses.
The Questions:
5. I see revenue is up 15%. How much of that was price vs. volume? (Watch their body language. If they hesitate, it’s all price.)
6. When was the last time you raised prices, and did you lose any customers? (If they say "No, nobody left," they probably aren't raising prices enough, OR their customers are stuck.)
7. How many unique invoices did you send out this month vs. the same month last year? (The ultimate truth-teller for volume.)
8. Who is your fastest-growing customer, and why are they buying more?
Category 3: The "Tape & Gum" Trap
The Insight: EBITDA is easy to manipulate; cash flow is not. The oldest trick in the book is "Deferred Maintenance." A seller will stop fixing machines or upgrading software 24 months before a sale to artificially boost their profit margins. As the buyer, you pay a multiple on that fake profit, and then you get hit with a massive CapEx bill in Year 1 to fix everything they ignored.
The Questions:
9. What is the oldest piece of equipment on the floor right now?
10. If I gave you $50k to spend on the facility today, where would you spend it? (Their answer tells you exactly what is broken.)
11. Who fixes the machines when they break? Is it a vendor or “Bob in the back”?
12. When is the next major software/server upgrade due?
Category 4: The "Key Man" Ransom
The Insight: There is a difference between "Business Goodwill" (transferable) and "Personal Goodwill" (non-transferable). If the clients trust the Brand, you are safe. If they trust Steve the Owner, you are in trouble. You need to find out if the revenue is emotionally attached to the seller.
The Questions:
13. If you went to Fiji for 30 days with no cell service, which client would be the most upset?
14. Does anyone on your sales team have the authority to discount pricing without asking you first? (If No, the owner is the bottleneck.)
15. Who plans the company holiday party? (Sounds silly, but reveals who holds the culture together.)
16. Do you have any “handshake deals” with suppliers or customers that aren't in writing?
Category 5: The "Cash Trap"
The Insight: A business can be profitable and bankrupt at the same time. If a company pays its bills in 15 days (AP) but waits 90 days to get paid by customers (AR), it is a cash-eating monster. Sellers often hide this by injecting their own personal cash to smooth things over. You need to know the true Working Capital peg so you don't run out of money on Day 1.
The Questions:
17. Do you pay any suppliers early to get discounts? (If yes, the AP balance might be artificially low, and you will need more cash to run the business.)
18. Who chases the late invoices? You or a controller?
19. Have you ever had to delay your own paycheck to make payroll?
20. What is the 'Magic Number' in your bank account that lets you sleep at night? (This tells you the real Working Capital requirement.)
Summary
Diligence isn't just about spreadsheets. It's about psychology.
Most sellers aren't malicious liars, they are just optimistic. They genuinely believe their business is a well-oiled machine.
It is your job to verify that claim.
Use these questions. If the answers make you nervous, walk away. There is always another deal.
To Your Growth, Favian Vega, Toro Growth Group