Make sure you uncover the skeletons first.
Apart from buying your home, the purchase of a business may be the next biggest purchase you’ll make during your life. Therefore it’s important to do your homework before you part with your hard earned money. In the accounting world we call this process ‘due diligence’.
Due diligence involves thoroughly investigating all aspects of a business for sale. It can involve looking at a business’s operations, financial performance, legal and tax compliance, customer contracts, intellectual property, assets and other details, often within a time period specified in a letter of intent.
Due diligence is usually conducted after you and the seller have agreed in principle to a deal, but before signing a binding contract.
The information collected during due diligence is highly sensitive and confidential. The seller might want you to sign a non-disclosure agreement before you access this information.
We can’t stress enough how important it is to go through the process systemically and ask questions and gather supporting information. As after you’ve purchased the business it’s too late to discover things that will negatively impact the businesses future
Kim Jay CA – Director.