Once a buyer has negotiated a deal and secured the necessary financing, he or she is ready for the due diligence phase of the sale. The serious buyer will have retained an accounting firm to verify inventory, accounts receivable and payables; and retained a law firm to deal with the legalities of the sale. What\u2019s left for the buyer to do is to make sure that there are no \u201cskeletons in the closet,\u201d so he or she is not buying the proverbial \u201cpig in a poke.\u201d<\/p>\n
The four main areas of concern are: business\u2019 finances, management, buyer\u2019s finances, and marketing. Buyers are usually at a disadvantage as they may not know the real reason the business is for sale. This is especially true for buyers purchasing a business in an industry they are not familiar with. The seller, because of his or her experience in a specific industry, has probably developed a \u201csixth sense\u201d of when the business has peaked or is \u201cheading south.\u201d The buyer has to perform the due diligence necessary to smoke out the real reasons for sale.<\/p>\n
Business\u2019 Finances: The following areas should be investigated thoroughly. Does the firm have good cash management? Do they have solid banking relations? Are the financial statements current? Are they audited? Is the company profitable? How do the expenses compare to industry benchmarks?<\/p>\n
Management: For a good quick read on management, the buyer should observe if management is constantly interrupted by emergency telephone calls or requests for immediate decisions by subordinates? Is there a lot of change or turn-over in key positions? On the other hand, no change in senior management may indicate stagnation. Are the employees upbeat and positive?<\/p>\n
Buyer\u2019s Finances: Buyers should make sure that the \u201cmoney is there.\u201d Too many sellers take for granted that the buyer has the necessary backing. Sellers have a perfect right to ask the buyer to \u201cshow me the money.\u201d<\/p>\n
Marketing: Price increases may increase dollar sales, but the real key is unit sales. How does the business stack up against the competition? Market share is important. Does the firm have new products being introduced on a regular basis.<\/p>\n
By doing one\u2019s homework and asking for the right information \u2013 and then verifying it, buying a \u201cpig in the poke\u201d can be avoided.<\/p>\n
Looking to buy or sell businesses in Dallas-Forth Worth? We are here to help. Fill out the Angel Brokers Group contact form on the right and we will be in touch with you shortly.<\/p>","protected":false},"excerpt":{"rendered":"
Once a buyer has negotiated a deal and secured the necessary financing, he or she is ready for the due diligence phase of the sale. The serious buyer will have retained an accounting firm to verify inventory, accounts receivable and payables; and retained a law firm to deal with the legalities of the sale. What\u2019s […]<\/p>\n","protected":false},"author":10,"featured_media":3295,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[63],"tags":[],"class_list":["post-3828","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buyer-articles"],"yoast_head":"\n