Why is Due Diligence Extremely Important?
9 Key Due Diligence Steps When Buying a Business
What is due diligence?
Due diligence is the process of evaluating a business from all aspects before a decision (typically on whether to buy it) is made. The process is often performed by a buyer in order to uncover any potential liabilities and financial matters that may be hidden. Conducting due diligence allows you to take note of the discrepancies between what is reported by the seller and what is actually going on regarding the business, that way you can make a fully educated decision on whether you want to negotiate further or walk away from the transaction.
What does the due diligence process involve?
During due diligence, you will examine all records and documents regarding the business’ operations and finances, including:
- Financial information – historical financial statements and projections of its future performance
- Customers/Sales – customer relationships, seasonality in revenue, purchasing policy
- Material Contracts – loans, settlement agreements, and customer, supplier, franchise contracts
- Employees/Management – labor disputes, employment agreements, management incentive/bonus plans
- Technology/Intellectual Property – copyrights, common law trademarks, patents
- Litigation – any litigation (pending, threatened, or settled), arbitration, or regulatory proceedings
- Tax Matters – federal, state, local, and foreign incomes sales, government audits
- Insurance – general liability, intellectual property, health, and worker’s compensation insurance
- Property – deeds, leases of real property, deeds of trust and mortgages, title reports
At Florida Connexion Business Brokers, we have the extensive experience needed to help business buyers and sellers secure profitable results. Our background and experience in business management provide local and international clients the counsel they need to run a successful business in the highly competitive U.S. market. Multilingual in English, Portuguese, Spanish and French, our team specializes in a select variety of business niches in order to offer real technical expertise. Contact us today to get started on buying your next business.