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 its related factors that are 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 ensure that this enterprise is in top shape, from top to bottom. To achieve this, you’ll want to have an experienced business broker who is familiar with the local economic conditions and business environment in the Sacramento area. You should talk to Andrew Rogerson.
Complete Inspection
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, and 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 the details in case you need to renegotiate or walk away from the deal.
Financial Data
The due diligence will cover all parts and functions of the business. One of the most critical areas of concern is the company’s finances.
This review should be conducted by the buyer’s CPA or licensed professional so that 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 obtaining from the Seller, along with any other related documents.
Some of the things your CPA or licensed professional will be examining include the company’s collectibles, 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 additional items to review, including depreciation and amortization methods, changes in accounting methods, fixed and variable expenses, the general ledger, and its internal control procedures.
Employee and Employment Information
In addition to helping investigate all financial aspects, Andrew will also request the business owner’s employee handbook, any existing employment agreements, salary information, employee benefits plans, and any non-compete agreements and confidentiality agreements currently in effect. This will provide insight into whether any potential legal issues with employee policies or practices could 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.
Business Operations
Another essential type of due diligence concerns running the business. Andrew will request customer lists, vendor information, 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 a thorough job. It’s also challenging to do if you are the buyer, as your emotions and motivations become entangled in the deal-making process. By consulting with Andrew Rogerson, a seasoned business broker familiar with the economic and business climate in the Sacramento area, we’ll ensure that all the i’s are dotted and all the t’s are crossed, 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 necessary steps when buying a business. Pay attention to details and the many approaches for success. Use the proper professional(s) to guarantee a successful outcome.
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 buying a business, and completing due diligence is just one of those steps. Click this link if you would like a one-page summary of the Many Steps to Buy a Business.
If you would like more detailed information about buying a business, please visit my webpage, Buy a Business, or obtain a free copy of my book, Successfully Buy Your Business.
For more immediate help with buying a business, you are welcome to send an email to Andrew Rogerson or give me a call toll-free at (844) 414-9700
