Valuable Suggestions On Due Diligence Checklists And Business Buying

December 28, 2010 by drewloupsen · 11 Comments 

Most people understand that they will need to conduct a process known as “due diligence” when they are getting ready to buy a business. Some people might think that this is just a part of a process that can be siphoned off to their accountant, even though they realize that it might be very important. They may have a great deal of trust in their financial advisor and think that he or she will undoubtedly advise them if there is something that they need to look at.

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. Delegation should be furthest from your mind. 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!

Any mistakes here will have potentially far-reaching consequences. Remember, that as time marches on, there is more pressure, more input from third parties and more of a temptation to shortcut the process. You must never do this and make sure that you stick to your due diligence checklist firmly. A lot of the checklist items are inherently based on a common sense approach, thankfully. You can start your process of discovery before you even tell anybody about your wishes or desires. For example, you can check out the area that you are considering, what kind of people live there, traffic flows, the potential business prospects and a whole host of information that is, after all, essential.

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. Remember how dynamic a business can be and how so many external influences and factors come into play in order to make it work, let alone succeed. You have to have a great appreciation for all of these factors and influences and cannot rely on the seller to draw your attention. This is why you should be so diligent with your due diligence checklist, following through and exploring every avenue, thoughtfully.

The owner will be very focused on the business and will often not be able to look at it from a broader perspective. 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.” A careful approach is essential, especially when you realize that the process could take weeks or even up to a month or so before it is finished.

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 their dream to buy a business.

Superb Ideas On The Domain Of Reading Between The Lines

December 23, 2010 by drewloupsen · 14 Comments 

In our entrepreneurial world you need to be able to get on with people really well if you want to get anywhere. There is so much competition and so much pressure on you if you are in charge of a business, that you need to be able to interact with people from all denominations, countries, origins and creeds if you want to be really successful. While there may be a definite trend toward service provision in the business world as a whole and many new businesses may well exist online, as opposed to in “bricks and mortar” form, the fact is that you have to be able to interact with people in one way or another, successfully, in order to make it work.

If you break down the process of buying and selling, you will quickly find out that every person involved in the process has an agenda. In short, they want to achieve something. The buyer has something in mind, is looking for a great price and wants to come out on top. However, they may realize that what they’re looking for is rather difficult to find, or is particularly valuable and then their objective may be just to get that item at whatever cost. The seller has a number of items on his or her agenda. Not only is the sale important, but the buyer’s satisfaction should be paramount, as the real benefit of a client is in their lifetime value. We all know how difficult it is to get new clients, so it’s better to look after the ones that you have got.

You should be able to read between the lines when it comes to the process of buying a business, as well. Recognizing the motivators, the hidden agenda in many cases, may well be crucial as you navigate your way through this often complicated process. You need to be able to reveal the “real meaning” at every phase of that journey and once again understand that every person who you come across will have his or her own agenda.

The vast majority of people involved with a business for sale are above board and you will be very unlucky if you come across any fraudulent activity, but do expect to find something beneath the covers, or hidden away in a closet. Those hidden items on the agenda may or may not be deal killers and may have little bearing on potential success after you buy business assets, but you need to be able to reveal them, nevertheless.

The seller may be a very successful business person and have a matching personality. You need to be on your guard against whitewashing and take everything that is said with a certain pinch of salt. Reading between the lines will be crucial as you go through your formal process of due diligence, but you can and should be critical of every detail contained within those preliminaries.

Remember that during the early stages of any process to buy a business, a certain amount of investigation must take place behind the scenes. The seller is not going to reveal all the cards until he or she knows that you are really serious. You need to gather as much intelligence on your own as possible, before you start.

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 their dream to buy a business.