Buying an Established Small Business – Due Diligence Checklist Tip » Buying a business

Buying an Established Small Business – Due Diligence Checklist Tip » Buying a business

How can you trust if a sellers financial claims are genuine?

When you are looking at buying an established small business, the seller may provide their earnings in one form or another. To verify the sellers’ financial claims, the first test is to ask for substantiation.If the seller cannot or will not back up the information – walk away – do not waste your time.You must be able to thoroughly research and investigate all the information.

Remember, there are many variables to calculate when buying an established small business, so it is wise to ensure a close ‘working’ relationship is built so that everything is out in the open and you have peace of mind about all areas of the business.

On some occasions, the seller has a different figure to what is actually in the records. There may be a good reason for this – perhaps there is a percentage of cash which is not always recorded and not relied upon. It is up to you to look into this to ensure you understand why, what amount and when is it taken in.

Do not take anything at face value. The saying “you get what you inspect not what you expect” applies here.

When you do find a business that passes the 1st and 2nd stages of your inspection, you then do a comprehensive due diligence checklist, ready for the remainder of your inspection.

Most sellers are good honest people some however are extremely tricky.

A vital part of buying an established small business- is conducting the inspection using a comprehensive due diligence checklist. The financials of the business are most important and should be done carefully and at your own pace. Here are a couple of starting points before you go any further in the business buying process:

1/ Request to see previous years tax returns and general accounts documentation

2/ Ask for evidence of all discussions with the vendor eg. Purchases made, staff, suppliers, leasing agreement to name a few

All the information for every facet of the businesses must be carefully investigated before negotiating begins.

Take your time and do not be persuaded to rush through your due diligence checklist. This is a big decision and your future financial situation is at stake. If you have covered everything necessary, there will be far less room for error or even regrets.

For more information regarding risk factors and analysis when Buying a Small Business, a recommended resource for expert, user-friendly, step by step Business Buying Information and Small Business Appraisal Software Tool, go to http://www.bizbuykits.com.

The authors of the Bizbuy Kit also created a kit for vendors – the Bizsale Kit. These kits include the popular Books ‘How To Buy A Business‘ and ‘How to Sell Your Own Business‘ and have been created by experts in their fields of Business Buying, Selling and Business Valuation. With decades of experience buying and selling businesses of all types and sizes, they have seen many mistakes made by both buyers and owners and want to share their wealth of knowledge so these mistakes can be avoided for a win/win outcome.