A crucial step when purchasing a business is the due diligence stage. It is due diligence which enables you to figure out whether or not this business is for you. It also helps to determine what price you will be prepared to pay for it.
Determine the reason why the seller is trying to sell the business. As soon as you are convinced that the motivation is not to run away from anything unfavorable which you are going to be inheriting, you are able to do additional due diligence.
Speak only to your business broker and the seller, unless otherwise instructed, to maintain confidentiality.
The evaluation of the business will begin with examining the previous three years of financial records. You need to reveal any unresolved legal actions, relationships with vendors and clients, intellectual property rights including copyrights or patents, as well as any future liabilities.
Once you have all the necessary information you can make an informed decision about whether or not to proceed. This is the nature and necessity of due diligence.