Due diligence is an all too important part of buying a business. This phase of the business transaction allows the buyer access to all the records and contracts of the business, and is the time for the buyer to determine whether or not to proceed with the business purchase and how much they are ultimately ready to pay.
Some things you will want to consider during due diligence:
-Why is the seller selling the business? You don’t want to inherit a business that someone else is trying to run away from.
-Evaluate the last three years of financial records.
-Look into unresolved legal actions
-Examine relationships with clients and vendors
-Understand any intellectual property rights like copyrights and patents
During due diligence, be sure that you are speaking only with your business broker and the seller, as it is incredibly important to maintain the confidentiality of the sale. Once you have been over the necessary information and records, you can go ahead and make your decision on the purchase of the business. Due diligence is your best opportunity to examine the business, so be sure to use the time wisely.