Due diligence is the process a potential buyer goes through prior to closing on an acquisition. The process might uncover problems or challenges in the business, but at the very least it helps the potential buyer know that all representations made by the seller during the selling process are accurate.
The Importance of Due Diligence
The seller of a business can improve his chances of a deal going through if he does his own due diligence on his business, before taking it to market. Sometimes a business owners is so close to his business that he can’t “see” what others might see.
“Must-Examine” Areas for Due Diligence
As part of their due diligence process, the business owner should collect a variety of information about the business. It would be a mistake to only focus on getting the financial records up to speed. While that is indeed critical to the process of selling a business, the business owner should also consider:
- Organizational information like bylaws, operating agreements, and/or agreements between owners regarding equity contributions.
- Any and all contracts, including supply, financing agreements, insurance policies, employment contracts, and advertising agreements.
- Employment or labor issues, such as benefit plans, vacation policies, and wages generally.
- Intellectual property such as copyrights, trademarks, and trade names.
Take a good long hard look at all of these aspects of your business to spot potential holes or problem areas. The pros at Tennessee Valley Group, Inc. can help you prepare your business for sale. Contact our team today for more information.