Apply A Due Diligence Checklist When You Buy A Business For Sale - By: Richard K Parker

It's a well-known fact that you will need to engage in a process which is known as "due diligence" if you are contemplating the purchase of a business. If you want to buy a business successfully, this is a very important part of the entire procedure and not something that you should just outsource to another expert. Your accountant or advisor may well be very competent, but is he or she really able to take over from you completely, here?

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. None of this can be delegated. 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!

You cannot afford to make any mistakes during any part of the process. 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. The good news is that the majority of items on your checklist stem from a common sense approach to revelation. You can start your process of discovery before you even tell anybody about your wishes or desires. Start to check the prospects, look at area demographics, traffic volumes and flows and other information that is fundamental to the very concept of business in the first place.

As tempting as it may be, delegation to outside experts or accountants will more than likely lead to some kind of error or omission, especially if you are only intermittently involved. Just consider the dynamism of a typical business and the number of factors and influences that must be factored in every day. You and you alone must take responsibility for understanding all of these factors and you certainly should not rely on the seller to fill you in. Be conscientious and don't overlook anything as you construct your due diligence checklist.

Understand that the owner is totally immersed in the business and may not be able to see the forest from the trees, as the saying goes. 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." Approach this process methodically and remember that, to be most effective, the process is likely to take at least a month or more to complete.

About the Author

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 the value of a due diligence checklist when buying a business. To find out more=> http://www.diomo.com/due-diligence-checklist-guide.html

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