5 EASY STEPS TO BUYING A BUSINESS
STEP 4 – DUE DILIGENCE
At the end of the Due Diligence process, you should have a clear picture of where the business is today, where you can take it in the future and why the owner is selling.
The Due Diligence process involves examining the Financial Data, Income Statements, as well as the recent years Tax Returns to determine:
- Whether the claimed Profit can be verified
- The Accounts Payments and Receivables history
- The business structure: Legal agreements such as licences, permits, insurance policies, and documents related to intellectual property, franchise agreements, contracts with suppliers and clients
- Employees: Awards, wages and salary information, superannuation payment records. Whether there are any staff issues
- Operations: Discussions with the seller on suppliers and customers are desirable
- It’s worth analysing the business’s diversification of suppliers and clients
- Consider the equipment and its capabilities of handling future growth
- Post Due Diligence confirmation of premises lease documentation and resultant meeting with the landlord and managing agent
We can recommend experienced accountants and solicitors to help you with Due Diligence, if you do not have arrangements in hand yourself.
In addition to accountants and solicitors we can help you to obtain professional advice from other professionals such as:
- Finance Brokers or Bankers
Even if you’re an experienced Business Buyer it is still a good idea to have an additional opinion to help you reach an informed, well-balanced decision and to ensure a smooth Settlement. Through having been in the business sales industry for a long time, we have met and worked with many of Perth’s best advisors. Let us know if you need a recommendation for professional assistance. We can make suggestions to you on the appropriate route to take.
What if due diligence fails to meet expectations?
If the Due Diligence is not to your satisfaction, or your finance is refused, then your deposit is refunded and GMO will present you with other businesses to consider. Far more likely: Due Diligence, finance and lease issues will all be satisfied and you are now positioned to become the proud owner of the business!