You have been searching for various businesses for sale and now you have found that perfect business to buy. The business is represented by a reputable broker. You are comfortable with the terms, and now you wish to enter into contract and proceed with the due diligence phase. Everything you have been told by the seller and broker sounds good and feels right. So whats next? How deep do you need to dig?
Deep my friend. Yes, most brokers are very reputable. But remember they only get paid when the deal closes. And remember also that the broker is representing the seller, not you.
So what should you be digging for? Here is a partial list:
1) Negative business trends;
2) Negative industry trends;
3) Expected but undisclosed competition;
4) Any hint of a personal matter that would restrict the seller from selling;
5) Any partner, spouse, shareholder, or related party that would restrict the seller from selling;
6) Existing or past credit problems with banks or suppliers;
7) Any pending litigation against the company;
8) Any claims, liens, or encumbrances against the company or company real estate;
9)...
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