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?
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence
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.
|Shalonda Chappel-Pilgram: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|Peter Siegel, MBA, BizBen Founder, Lead Facilitator - ProBuy, ProSell
Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both platforms. I consult daily with business buyers, owner/sellers, and intermediaries daily about buying and selling businesses. Reach me direct at 925-785-3118.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
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.
|Elizabeth McGovern: Escrow Services - San Francisco Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Janet Carrera: Escrow & Bulk Sale Service - 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.
|Helen Yoo, New Century Escrow - Escrow Services In 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.
|Jim Saxton, Liquor License Broker & Consultant - SF Bay Area
20 years experience of local governmental requirements, such as Police Departments, Zoning / Planning Departments, and ABC District Offices, my company Liquor Licenses of SF Bay Area is very qualified to resolve all of your concerns during the liquor license transfer process. Call 925-787-0770.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
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As a SF Bay Area business broker (Rob Hartman), the phrase I hear often from my buyer clients is, "I am looking for an absentee run business." Since it is such a popular topic, let me offer an alternative method of business selection. There are a couple things to keep in mind as you search.
|Podcast/Vlog: Business Purchase Financing Chat: SBA Loan, Non SBA Financing
Ever wonder what is involved in obtaining business purchase financing to buy a business or franchise? Peter Siegel, MBA who has over 20 years advising and obtaining all types of financing for business buyers in this video/podcast - SBA loans, Non-SBA Financing, Alternative Financing Sources.
|Selling Your SF Bay Area Business: 3 Keys To Better Financial Statements
When you are selling your business, your presentation, for the most part, is going to be your financial statements. Everything begins there. SF Bay Area Business Broker Rob Hartman discusses how to best present your financial statements and what should be included when selling.
|Buying A Business: Why Is It Important To Look At Its Tax Filings?
Business tax filings are very important factor in determining the credibility of business financials. Just seeing those financials, you can't determine whether those values are overstated or not. Some business owners provide made up financials to buyers - so, that's where tax fillings come in.
|Business Purchase Financing Expert Peter Siegel - Tips On Proving Cash Flow
What are the actual "provable" adjusted net earnings (cash flow) of a small to mid-sized business being purchased? Buyers need to look carefully at all financial info for the "real" adjusted net income/cash flow. Peter Siegel, MBA (BizBen ProBuy & ProSell Lead Facilitator) at 925-785-3118 explains.
|How Do I Determine the Value Of My Small Business? Or The One I Want To Buy?
How do you determine the value of your business when you go to sell or even buy a business? There are so many factors and that is usually one of the first items serious buyers inquire about. Tim Cunha JD (SF Business Broker at 650-600-3751) initiates this Discussion On BizBen with other Advisors.
|8 Tough Questions You Most Likely Will Be Asked When Selling Your Business
When selling your small business, you'll be bombarded with questions - from the brilliant to the ridiculous. You need to be prepared. Here are some of the key questions you can expect to be asked. Tim Cunha (SF Bay Area Business Broker at 650-600-3751) reviews many of these possible questions.
|Business Purchase Financing Help - Expert Tips For Faster SBA Loan Approvals
Business purchase financing advisor Peter Siegel, MBA shares his views on SBA loan financing. He explains the nuances of the SBA loan process when considering business purchase financing or getting pre-qualified. Reach Peter Siegel, MBA direct at 925-785-3118 regarding SBA & Non SBA Loan Financing.
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