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Due diligence: How to prepare your business for scrutiny

BUSINESS SALES

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Due diligence is one of the most important stages of the business sale process. Due diligence is the procedure by which prospective buyers thoroughly examine all aspects of your company, including financial records, legal documents, and operations. The purpose of due diligence is to verify the financial and legal status of the business and to ensure that the buyer understands the business and its potential risks before committing to the purchase.

As a seller, you should be ready for due diligence and understand what buyers will be looking for. Here are a few pointers to help you prepare your company for scrutiny:

Gather all necessary documents

Have all relevant documents and materials in an easily accessible format and ideally in a single location. Be sure to respond to requests in a timely manner. Failure to provide documents or information promptly can delay the sale process or even cause a potential buyer to walk away from the deal.

Review your financials

Ensure that the financial statements are accurate and up to date, and that they provide a clear and accurate picture of the financial performance of the business. This is critical because financial statements are one of the most important documents reviewed by buyers during the due diligence process.

Be ready to answer questions

Be prepared to answer questions about the company’s operations, finances, and legal issues. Buyers will almost certainly have a number of questions as they evaluate the company to see if it’s a good fit for them. Being prepared to answer these questions can make the sale process go more smoothly and increase the chances of a deal closing.

Be transparent

Honesty is the best policy and transparency is essential when selling a business. It is critical to be open and honest about any issues or challenges that the company may be facing. This can include issues such as declining sales, high debt, or legal problems.

Buyers will appreciate your candour, as it helps them understand the full scope of the business and make an informed decision.

Presentable premises

Ensure that your premises are always presentable. While (depending on the nature of your operation) this can sometimes be challenging, it is a great way of creating a good impression.

Hire a professional

Hiring a professional to assist with the due diligence process can be a valuable asset when selling a business. Due diligence is an important step in the sale process because it involves an investigation of the business’s financial and legal status before the sale is completed.

Working with a professional such as a LINK Business Broker can help ensure that the process runs smoothly, and that all necessary information is provided. We also have access to some of the best lawyers, accountants and financial advisors in the industry. This helps us be absolutely certain that your business is best prepared and presented to prospective buyers and their due diligence professionals.

By following these tips, you can help ensure that the due diligence process goes smoothly and that you are able to close the deal on your business.

Remember that due diligence is also an opportunity for you to showcase your company and its potential to prospective buyers.

Related: How to prepare your business for sale

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Steve Catley
Steve Catley
Steve Catley is a Business Broker at LINK Business Brokers. He can be contacted at 021 341 117 and steve.catley@linkbusiness.co.nz

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