The short answer
Look beyond the asking price. Ask whether earnings are repeatable, how cash moves, what obligations exist, how dependent the business is on key relationships and what the price includes. Use the answers to define due diligence and valuation work before making a binding commitment.
What you will take away
- A profitable business can still need additional cash.
- Due diligence and valuation answer different questions.
- Turn unclear answers into specific requests for evidence.
1. Do the earnings tell a consistent story?
Compare financial statements with recent management accounts and the explanations behind unusual results. Ask which income or costs are one-off, and what might change when the current owner leaves.
Write down every adjustment used to present the business as more profitable. Your enquiry should explain what the seller says the adjustment represents and what evidence is available. An unexplained adjustment is a question to investigate, rather than a figure to accept automatically.
References: BDC: Conducting due diligence when buying a business
2. How much cash does the business need to operate?
Review cash flow alongside profit. Customer payment patterns, supplier terms and inventory can influence how much money is tied up in operations. Ask what working capital would be needed after completion.
For the first discussion, make a separate list of the purchase price, expected transaction costs and the operating cash you believe will be needed. Keeping those questions separate helps an adviser understand the decision you are actually trying to make.
References: BDC: Conducting due diligence when buying a business
3. What obligations are you taking on?
Request information about borrowings, unpaid balances, contracts, leases and relevant tax matters. The Australian Government’s business-buying guidance recommends reviewing financial, operational and legal records before a purchase; those general checks are useful prompts, not Malaysian legal requirements.
Clarify what is being acquired and involve Malaysian legal and tax advisers for the proposed structure. Record what is known, what is missing and which adviser will investigate each issue.
References: Australian Government: Buy an existing business
4. How dependent is the business on a few relationships?
Understand how much revenue depends on major customers and whether key supplier or owner relationships will continue after a sale. BDC identifies customer concentration as a due diligence consideration.
Ask the seller to describe the transition plan in concrete terms. Who will introduce customers? Who knows the operating process? Put questions that remain unanswered into the due diligence request list.
References: BDC: Conducting due diligence when buying a business
5. What supports the price, and what does it include?
Identify the assets, inventory, contracts and other items included in the proposed purchase. Due diligence investigates information and risks; valuation considers value using an agreed basis and relevant assumptions. Neither should be reduced to the asking price alone.
Before your adviser meeting, prepare a short deal summary: target business, proposed acquisition, seller’s price, available records and your main concerns. You do not need a polished investment presentation to begin a useful conversation.
References: Australian Government: Buy an existing business · Australian Government: Value your business
Turn the five questions into a request list
Use a simple note with three columns: question, evidence requested and person responsible. Mark unanswered items clearly. This turns a broad concern such as “Are the numbers reliable?” into a discussion that can be scoped.
- Bring the seller’s information pack and available financial records.
- Explain your intended purchase and financing assumptions.
- Agree the due diligence and valuation scope with the relevant advisers.
- Discuss findings and unresolved issues before making a binding commitment.
Common questions
Is due diligence the same as a business valuation?
No. Due diligence investigates information and risks. Valuation considers value on an agreed basis and assumptions. A transaction may require both, alongside legal and tax advice.
Can these five questions confirm that a purchase is safe?
No. They are prompts for an initial discussion, not a complete investigation or a guarantee. The work required depends on the business, proposed transaction and information available.
Sources & further reading
Sources checked 11 October 2026. The checklists and examples are practical editorial suggestions, not a statutory document list.
- Australian Government: Buy an existing business
General due diligence concepts only. Australian legal, tax and registration requirements do not apply to Malaysian transactions.
- Australian Government: Value your business
General valuation concepts and the financial information used to support a valuation; not Malaysian legal or tax guidance.
- BDC: Conducting due diligence when buying a business
General acquisition and risk concepts from the Business Development Bank of Canada; not Malaysian legal or tax guidance.
General information for preparation and discussion. Requirements and the appropriate scope depend on your circumstances; confirm current requirements before acting.
Your next step
Make the conversation about your business.
Share a brief description of the target business, the proposed transaction and the information available. Our team can discuss the scope of due diligence or valuation support.
