Apply A Due Diligence Checklist When You Buy A Business For Sale
Due diligence is a vitally important part of the process when you are getting ready to buy a business, as most people seem to understand these days. Don't underestimate the significance of this procedure though and think twice before you consider delegating it to an adviser or an accountant. You may have a great relationship with this person, but are you really sure that you want to bypass this procedure yourself, altogether?
The truth is that the entire mind process, from start to finish, must be controlled by a due diligence checklist, which is the primary responsibility of the buyer alone. None of this can be delegated. Of course it is acceptable to engage the services of professionals and advisors, but you will reference your due diligence checklist from the moment you start to think about the business purchase, right up to the moment that you get ready to sign the papers -- if you do!
Mistakes must be avoided at all costs as you complete your journey. You might come under pressure as time goes by, especially as more and more people get involved with the process, tempting you to make shortcuts. Be firm and make sure that you retain allegiance to your due diligence checklist. Of course, most of the items that you will consider on this checklist are based on good common sense, so don't be overwhelmed. Begin your process of revelation before you even tell anybody else about your ideas. Look at the prospects from afar, assess the demographics of the people who live in the area, the likely amount of traffic that you might get to the business and a whole host of other information that is important.
If you delegate the process of due diligence to your accountant or advisors alone, with only cursory input from yourself, you are almost certain to overlook something in the long run. A business is very dynamic and is dependent on so many external factors and influences in order to survive, let alone prosper. It is your job to understand every single one of these external influences and you cannot rely on the owner alone to alert you. You simply need to leave no stone unturned and apply a concerted thought process as you construct your due diligence checklist.
Understand that the owner is totally immersed in the business and may not be able to see the forest from the trees, as the saying goes. It's your job to stand well back to start off with and to see things the owner may not be able to visualize. If you undertake a comprehensive process of due diligence, you will end up knowing more about the business than the owner him or herself and this is the only way to make sure that you enter into a purchase contract with your eyes firmly open. Remember that a due diligence checklist should be a formal document and not something that is "in your head." Approach this process methodically and remember that, to be most effective, the process is likely to take at least a month or more to complete.
About the Author
Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize the value of a due diligence checklist when buying a business. To find out more=> http://www.diomo.com/due-diligence-checklist-guide.html
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