Thinking of Buying a Business? Then You Vitally Need Due Diligence Before You Commit
Get the facts to get the right price. You do this through a business due diligence. This way you know if the price for the business is fair. Due diligence is a comprehensive analysis of the business undertaken by a prospective buyer or his broker. They will evaluate the financials and other “facts” provided by the seller. It reveals what a fair price is or even if the business is worth buying at any price.
80 % or more of the small businesses on the market are junk
Most of the small businesses on the market do not make a profit and are not worth buying. The owners of the few that do make a profit have a legitimate reason for wanting to sell. You need to know what that reason is. This is what the due diligence will find out for you.
Hire an expert and don’t get taken advantage of
When we talk with some first time prospective business buyers, they are shocked when they discovered the fine print in the purchase contract was different than what they were told or thought.
Many buyers are very surprised that there are so many little tidbits of important information to be looked at that they didn’t have a clue about. In fact, when buyers sit down and have a heart to heart talk with an experienced CPA, attorney, or business broker about their prospective purchases they learn that there are dozens of financial and non-financial issues that must be looked at. They did not know they needed to look at
- Lease terms
- Accuracy of the past financials
- Foreign competition
- Employee issues
- And much more.
Lastly, when prospective buyers hear information regarding the future of the industry they are considering buying into, they are again surprised that this information was not on the internet or disclosed by the seller.
Don’t lose your investment
You can recover from a few items missed while doing due diligence. You can’t replace the money lost because you thought you knew all about the subject. Do a due diligence to find the right price and avoid loosing a lot of money.
After completing many hundreds of due diligence assignments, we know where the “bodies are buried”. We know the questions that the buyer does not want you to ask. We are here to watch your back.
Bottom line – don’t buy a business without the assistance of an experienced due diligence CPA, who does not benefit from the deal closing. If the CPA does not get money if the deal closes, he is not going to cover up something you would want to know.
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