Thinking of Buying a Business? Then You Vitally Need Due Diligence Before You Commit
Business due diligence is a comprehensive analysis undertaken by a prospective buyer to establish the fairness of the asking price and evaluate the financials and other “facts” provided by the seller.
80% or More of the Small Businesses Listed on the Market Are Junk
That means the seller claims to be making a profit when they are not or the asking price is way out of line. The remaining 20% are making a profit but they have a good reason for selling – a buyer must be able to determine that reason.
Buying a business requires experience either by the buyer or his advisors. Buying without expert assistance is a guarantee to over pay by $100,000s or even worse potentially lose 100% of your investment. This is not for the faint of heart.
Don’t get Blindsided on a Purchase Agreement without Expert Due Diligence
When we talk with some first time prospective business buyers who have hired us, they were 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 are shocked to find that there are dozens of financial and non-financial issues that must be looked at, that one would never have dreamed of. Such as:
- 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 When Buying a Business
You can recover from a few items missed while doing due diligence, but you can’t replace the money lost because you thought you knew all about the subject.
After completing many hundreds of due diligence assignments, we know where the “bodies are buried” and 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.
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