The diligence items you need to look at may vary depending on the type of business you are purchasing. It is wise of you to consider this early in your search so that you can add certain items and issues to your list that come to light through the search process. If you are working with a qualified business brokerage that has experience in the specific industry you are looking at, it would be advisable to have your broker prepare a diligence list for you. If your broker is not experienced or able to help you to your satisfaction then you should find someone knowledgeable or in the industry to ask specifics of.
That said, diligence should include some level of information regarding,
- Lease or Property Agreements
- Inventory of Equipment, Machinery, Furnishings, Vehicles, Primary
Supplies and separately the inventory (if any).
- Income & Expense items, These could include taxes, P & L statements, Balance sheet, Actual payment receipts, Utility Billings, Bank statements, Register tapes, Ledgers, Service records. Service Records and anything specific or unique to the business.
- Disclosures regarding anything known that may influence the business income either positively or negatively.
- You should have all equipment, mechanicals and roof, AC, plumbing, electrical and vehicles looked at by professionals if there is any question as to the condition or value of these items.
When doing diligence, I like to look at as much as the seller is willing to give. It is worth mentioning that the seller may look at this as being overly intrusive. While you do need the information it is good to be respectful of the sellers time as well.
My experience with time of doing diligence is it will take 2 to 5 weeks, depending on the particulars of the business and availability of those helping you.