Due Diligence
You’re ready to purchase your first, or your next business. It’s an exciting time. You have an idea of what you want to buy, you’ve looked around, and have found the ideal business. Or have you? Doing due diligence will help you make a more informed decision.
What is that business truly worth?
To really know you need to do a comprehensive appraisal of the business. The key is to establish the commercial value of the assets and liabilities. Sometime in the future, you may regret accepting a figure written on the balance sheet at face value. Have the discipline to determine the value of both the assets and liabilities.
You must do your due diligence before you make any major business decision. This is especially true when buying someone else’s business. You don’t want to purchase a business that has been overvalued.
During the due diligence process, you will need to ask tough questions of the business seller. Knowing what questions to ask is key. You will learn what questions to begin asking by consulting with a professional accountant.
Beyond simply looking at revenue, you need to take into account assets, inventory, business practices, and profitability. Each of these factor into the health of the business. Is the business you’re intending to buy thriving, stagnating, or deteriorating?
Does the business have any legal matters outstanding? Are their taxes up to date? Has there been a recent business valuation prepared, or do you need to have that done as well?
A proper business valuation is crucial to making the right decision.
Make an informed decision about the business you wish to purchase. Don’t rush and make any hasty decision based on emotions with only half the facts. Have a professional accountant conduct a financial audit of the business for you.
Due Diligence will save you headache and potential heartache. Poor decisions take years to rebuild. That’s years of work you may have to do to get the business back to the value when you brought it.
Would you rather the discipline of the due diligence process or the regret of overpaying for the business?
Arrange a meeting today with our Springwood Accounting team and get the best advice for your business.