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 805-428-2063 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 805-428-2063.
|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.
|Ralph Santos, Business Broker Specialist - Health Care Related Businesses
Using my MBA and my perseverance I will make things happen! I provide business brokerage niche services specializing in the hospice and home health care agency industry in the Los Angeles County or Ventura County areas. For either buying or selling assistance please phone or email me today.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance
For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
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