Before making a final commitment to an acquisition, it is essential to complete a thorough Due Diligence. Here are a few important things to consider when completing a due diligence. Be sure to inspect all aspects of the business before moving forward. Pay attention to detail and consult with advisors where necessary. Your experienced and qualified business broker will guide you through the process, making use of checklists and their wealth of knowledge related to the due diligence.

How is this business operated, what are the daily weekly and monthly requirements to operate the business? What is your time requirement in operating the business? Where is the business located, are the premises leased or owned? If leased, is the landlord aware of the sale and what are their approval requirements and lease terms? Is there an experienced team and will they be staying on if you purchase the business? Are staff well-trained, are there performance appraisal records to review, are all contracts up to date, are there any targets and incentives in place? Is the business fully compliant in terms of industry requirements, licenses and regulations? What are the key compliance areas for this specific business? In terms of intellectual property, does the business own any unique IP? Does the business have the right to use what they are using? Are there any trademarks and or copyrights or patents in place? If purchasing a franchise, its important to understand the nature of the franchise agreement, training, support and royalties.

When you buy a business, you are also buying outstanding legal issues. It is essential to check if there are any claims, past or pending cases as these will transfer to new owner unless a special include clause is included in the sales agreement. Does the business have a valid tax clearance certificate, have the financials been audited, are there any problems with previous tax returns? What is the financial position of the business in terms of total revenue, gross profit and net profit figures and what is the cash flow requirement? What are major expenses in the business? Does the current owner draw a salary from the business and are there any discretionary earning that you need to be made aware of? What is the status of the balance sheet, what does the business own and what does it owe? Does the business make use of credit and if so what are the credit terms with suppliers? Does the business have good, long lasting relationships with its suppliers? From a customer perspective, are here any testimonials or references to review? Are there customer contracts in place, who are the biggest customers in relation to the total income of the business? Is customer support or spend related to a personal relationship with the current owners?

Pay careful attention to the DD and take the time to do it properly. This is your last chance to ensure you are entirely happy with the business to proceed with the purchase. The DD is signed off by all parties and is a binding addendum to the sale agreement.