How many attorneys have you seen that have successfully represented themselves in court?
How many doctors have you seen successfully conduct an operation on themselves?
Just as with doctors and lawyers, doing a business review or audit by yourself, in order to save a buck, does not work.
There is an old saying that applies here, "There is nothing more expensive than cheap."
When doing due diligence alone, without any assistance, you're allowing emotions to play a big part, eventually leading to a bad decision. I have actually seen buyers not hire someone to help them entirely because they didn't want to have their dream killed by the truth. Of course, later they wished they had gotten help, because that dream business they imagined in their head turned out to be nothing like the business they purchased.
You can do a large portion of the due diligence yourself, depending on your background, but you should never try to do it solely on your own. Let's go over a few of the reasons:
1. People hire a CPA or other qualified person because they need an expert opinion, and the more experience the expert has (not knowledge, but experience), the more valuable he is to you.
2. Everyone needs someone to bounce ideas off of. And everyone looks at the same information from a different perspective. Life experiences and different educations give us multiple points of view. If you are in a partnership where you and your partners always agree, you have one partner too many.
3. You always end up with a better deal when the final approval is subject to a second person's approval. When I bought businesses for myself, and had my Vice President approve my actions, I always found things about the business that allowed me to make a better deal.
Due Diligence for a small business can cost between $350 to $5,000. If the purchase price is $500,000 that is just one percent of the purchase price. And you're using it to give you some assurance that you are getting what you think you are paying for.
Can you buy any type of business insurance for only 1% of the face on the policy?
About The Author: Willard Michlin, CPA, offers business buyers Due Diligence Services (Second Opinion, Offer Assistance, Final Due Diligence) throughout California when they are thinking of making an offer on a business or in the process of investigating a business purchase. He has written numerous articles on the due diligence process and can be reached direct at 800-864-0420 for more information and an appointment.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|George Lanza, Business Broker, At Plethora Business Sales
Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses.
|William Park, Business Broker - Southern California
Highest Volume Broker in California, Simply Check our HUNDREDS of Listings! Over 25 Associates, Speaking Dozen Languages, Helping Buyers and Sellers of Small Business since 1982, Centrally Located between Los Angeles and Orange Counties, while Riverside & San Bernardino Counties are Very Accessible.
|Adam Orhun, Broker Specialist, Car Washes, Gas Stations - S CA
Over 20 years I have built solid resume on sales of gas stations and full, express or self-service car washes with or without land in Southern CA. Experience, recognizing upcoming obstacles, and instant problem solving is my strength. Call me today about selling / buying a gas station or car wash.
|Ryan Clark, Business Broker, Southern California
The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups. Phone Ryan at 310-652-8353.
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