Do Due Diligence or End up in Do-Do
What is Due Diligence?
Due diligence is simply the homework that one does when they are contemplating the purchase of a business. It’s the detailed research and analysis of a business and it’s related factors that’s conducted in preparation for the sale by the buyers.
If you are considering buying a Sacramento business, you’ll need to do this homework. You’ll want to make sure that this enterprise is squeaky clean and shipshape, top to bottom. In order to do this, you’ll want to have an experienced business broker who knows the economic conditions and business environment in the Sacramento area. You should talk to Andrew Rogerson.
Andrew Rogerson will help you do a complete inspection of the business you want to buy in Sacramento, CA starting with the lease, financial statements, loan application process if the buyer needs an SBA loan and help identify the key components that make the business successful. Andrew wants you to buy this business; if it’s right for you, but he also wants you to have every aspect of the business operation uncovered so that you know all of the details in case you should need to re-negotiate or walk away from the deal.
The due diligence will cover all parts and functions of the business. One of the most critical areas of concern are the company finances.
This review should be conducted by the buyers CPA or licensed professional so if any errors are made, both legal and financial recourse is available. This will include a meticulous review of the company’s financial statements, balance sheets, income statements, cash flow statements, and business tax returns which Andrew will assist in getting from the seller including any other related documents.
Some of the things your CPA or licensed professional will be examining include the company’s collectables, bad debt written off, profit margin, any outstanding liens, current debts and liabilities, as well as a schedule of inventory, accounts receivable, and accounts payable.
There are many more numbers to review, such as the depreciation and amortization methods and changes in accounting methods, fixed and variable expenses, the general ledger, and their internal control procedures.
Employee and Employment Information
In addition to help investigating all of the financials, Andrew will also ask the business owner for the employee handbook, any employment agreements, salary information, employee benefits plans, as well as any non-compete agreements in effect and confidentiality agreements. This will provide a sense of whether there are any potential legal issues with employee policies or practices that put the business at risk. California regulations are pro-worker, and employers must ensure that they adhere to these state rules. If this uncovers any areas of concern, they will be brought to a licensed attorney representing the buyers interests for their opinion and further action.
Another important type of due diligence concerns running the business. Andrew will ask for customer lists, vendors, and sales processes. This will help determine if the company’s inventory and infrastructure are sufficient, and if there are any issues in the supply chain. Information on the customers will help determine current and future sales projections and growth strategies.
Talk to an Expert Certified Business Broker
There’s a lot to look at, and you most likely don’t have the time and expertise to do thorough job. It’s also very difficult to do if you are the buyer as your emotions and motivations get caught in the deal making process. By talking with Andrew Rogerson, seasoned business broker who knows the economic and business climate in the Sacramento area; we’ll make sure to dot all the i’s and cross the t’s so your investment in the business you buy is a success.
Do Due Diligence or End up in Do-Do
Performing due diligence is one of the many important steps when buying a business. It’s too simple to say its the most important step as there are many equally important steps and the proper approach and attention should be given to it. To make sure its done properly, use the right professional(s) to make sure it is done successfully.
Andrew specializes in private equity transactions and is a needed resource during the purchase of your new company. He will help minimize your exposure during the sales process and give you the benefit of his many years of negotiating business deals in the Capital City of California.
There are many steps to successfully buy a business with completing due diligence just one of those steps. Click this link if you would like a one page summary of the Many Steps to Buy a Business.
For more immediate help with buying a business you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.