If you are buying a new business, your Purchase Agreement MUST have a Due Diligence Clause.
You are making the decision about buying a business based on the representations of the current owner, as well as their Business Broker.
So a Due Diligence is your chance to make sure that everything they have represented to you about the business is true. And it is your chance to dig a little deeper and see if there is anything they haven’t been telling you!
Now we aren’t suggesting most people trying to sell you a business are trying to rip you off. But unfortunately it does happen and you need to do all you can to protect yourself!
Even if they don’t deliberately mean to do the wrong thing, you still need to perform your checks.
You see every business owner will have a better view of their business, and a somewhat inflated opinion of its true value. It is only natural. Usually, they have been involved in it for so long, and they have invested so much of themselves into it, they can’t help but be attached and have slightly less than an objective view of its real worth.
Then there are the business owners who may not actually be particularly good operators. Or at the very least they aren’t fully versed in all their figures and the realities of their business’ performance.
The Due Diligence is your chance to check things out and make sure no one is missing anything.
Before you buy a business, make sure to see our Chartered Accountant.