subject: How Importance Is Due Diligence? [print this page] "Due Diligence" refers to when a buyer agrees to purchase your business, based on them going over your financial figures with a fine tooth comb to ensure everything's correct. The buyer typically will do this with their accountant, and possibly also get their solicitor involved. But don't worry; with help from this document, we assure you will have enough armor to take on their hard questions.
For the person handling the sale, due diligence is often when they will work the hardest to keep the deal together. By preparing yourself with the following, you will be ready for any buyer.
The buyer will probably ask to see:
a) Detailed P&L's
b) Detailed balance sheets
c) Bank statements
d) BAS statements
e) Receipt books
f) Cheque books
g) Possibly the MYOB data file
h) Detailed aged payables & receivables
There are a few things you can do to ensure the due diligence process goes as smoothly as possible. You should consider the following:
First, ensure all your figures are accurate. If they are not, this process will uncover them. You will need the support data above to prove to the buyer this is a trustworthy sale. Again, they are paying you a large amount of money. Provide them the necessary information, and you should not face any problems.
Second, engage the services of a second accountant and have them do a due diligence on your business as if you were to buy it. Sometimes it's best to examine things as if you were a buyer yourself. Do you question any numbers in your books? Are there things that just don't add up? Put everything into question, as your buyer will undoubtedly do. Don't embarrass yourself by not asking for help. An extra set of eyes will only improve your case.
By doing this test run, you might be surprised what this accountant can dig up, which will allow you to make adjustments and be prepared.
It may sound extreme to go through all these steps, but imagine after 3 months of marketing your business and you finally find the buyer. And because your books don't add up, the buyer gets cold feet and decides to pull out of the deal. You can avoid scenarios like this by gathering strong facts about your business. You should be prepared with all the information discussed in this lesson.
Asset Agents offers a free, no obligation business evaluation service. We can to help aid with your business needs. With years of experience, our team is ready to assist you. To find out what your business is really worth, contact us at assetagents@gmail.com or phone 07 3103 5616.
