If you are looking to buy a business the term ‘due diligence’ should be familiar.
Due diligence is the process of thoroughly investigating the business to substantiate the claims made by the vendor (and broker) and ensuring that the business is sound.
Generally, you will need 5-9% of the sale price available for due diligence. For example, if the business has a sale price of $100,000 you will need between $5,000 – $9,000 for due diligence. (Remember to factor this in when figuring out whether you can afford to buy the business).
Who does the due diligence?
Your lawyer will do some due diligence work for you, usually by doing searches to make sure the business has all necessary licences, permits and approvals.
Your accountant will also help in doing due diligence, giving you tips on what information and documents to request from the seller to confirm the financial information already provided.
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