You Have Enough Time: Due Diligence For Business Buyers



 

 

If you are looking for businesses to buy, then you are probably frustrated by the paltry amount of information you are initially offered when a business peaks your interest. You sign a non-disclosure agreement and you may get nothing more than a few years of P&L statements and a highly abbreviated tax return.

 

How are you supposed to decide if a business is right for you if you can’t find anything out about the business you want to buy?

 

Due diligence.

 

Due diligence is the period of time after an initial offer is accepted where you as a buyer get to go through the business with a fine-toothed comb. Business sales are conducted this way because unlike other purchases – like a home or car – information about an operating business is often proprietary and needs to be kept strictly confidential in order to protect the business itself throughout the sales process (more information about why confidentiality is important can be found here). During due diligence you will be provided with basic business documentation and will also be given a chance to request other documentation you deem necessary.

 

How long do I have once due diligence starts?

 

The due diligence period is typically two weeks – plenty of time if you are using your time wisely. Two weeks is also plenty of time because due diligence doesn’t officially begin until AFTER all of your requested documentation is provided.

 

Two weeks? Are you serious? That hardly seems like enough time.

 

It absolutely is. By the time you get to the due diligence period, you will have had conference calls with the seller, face-to-face meetings, cursory information and initial questions already answered – the due diligence period is strictly a deep dive. Two weeks will be more than enough, especially if (as often happens) you are given a good chunk of the information you requested and it takes a week or two to get the rest. That will lengthen your due diligence period considerably and give you ample opportunity to decide if the business is right for you.

 

If, during your due diligence period, you decide that you don’t want to buy the business – you can walk away. This is another reason due diligence is relatively short. This period pulls a business off the market, so holding a business this way for an unnecessary length of time isn’t fair to the seller or to other buyers in the market who are also interested.

 

The message here is trying to force a seller to agree to a long due diligence period isn’t going to help you decide if a business is right for you. Using your time wisely during a two week due diligence period absolutely is. Ask your business broker about your concerns, and use their guidance during your due diligence period to get the most out of your time.

 

Are you considering buying a business but still don’t think two weeks is enough time for a proper due diligence? Would you like to know what types of special circumstances would lead to a longer due diligence period? Please ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com


Why Your Real Estate Agent Can’t Help You Buy A Business



If you are thinking about buying a business, your first step should involve looking for someone to help you find the right business for you. The right professional for the job is called a business broker – someone who specializes in helping people buy and sell existing businesses.

 

 

In our industry there are a lot of fly-by-night impostors who think that dabbling in the business broker profession is something that can be done on the side to make some extra money. Nothing could be farther from the truth. 

 

The business market and businesses themselves are very complex, and each business and each business transaction is unique. Helping people buy and sell businesses isn’t something you can do without the knowledge, experience and focus necessary to successfully reach a closing table. We’ll put it this way, you wouldn’t trust a general practitioner to do reconstructive plastic surgery on your face, you would use a plastic surgeon instead. Why? They are a specialist. Business brokers are specialists too.

 

The fly-by-night impostors come in all forms. We’ve come across lawyers, doctors and accountants who have tried to pass themselves off as someone who could help someone buy a business – but by far the worst offenders are real estate agents.

 

A real estate agent is a specialist in the buying and selling of homes and property, so many in that profession think they can seamlessly transition into helping people buy and sell businesses. Again, nothing could be farther from the truth. A home and a business are completely different animals, the business market operates by different rules and the set of skills needed for a successful closing on a house are completely different than those needed to reach the closing table for a business.

 

Many real estate agents attempt to dabble in the realm of business brokers by offering to help a client who already bought a house find a business. These agents call us and try to work out some kind of deal where they will represent their buyer clients in the business transaction. Whenever this happens, any business broker worth their salt will refuse to work with a real estate agent in this way.

 

Why? Why can’t I use the real estate agent I already know and trust?

 

You can’t because that real estate agent can’t help you buy a business. They have absolutely no idea what they are doing. As business brokers we would never try to sell you a car or manufacturing equipment for the same reason – we would have no idea what we were doing in that industry.

 

What should happen instead? Your real estate agent refers you to a qualified and experienced business broker, and they get a referral fee for the introduction. They essentially get paid for doing nothing more than exchanging phone numbers, so for the agent it’s a great deal. You as a buyer then get the proper help you need to successfully buy a business. Everybody wins.

 

The point here is you need to be suspicious of anyone who is not a full-time business broker who wants to help you buy a business. Save yourself the headache and get the right help from the start.  

 

Are you thinking about buying a business and want to know more about the difference between a business broker and a real estate agent? Would you like to know more about the process of buying a business? Ask us! Please leave us any questions or comments here and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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