This article are provided for information purposes only, and are not intended as legal advice.


Buying a business – due diligence

November 9th, 2008

Are you allowed to talk to the key employees? are the key employees aware of the impending sale?  Is staff turnover high in the company, if so why?  Does this show that there is a problem in the company?

What is the relationship between the old owner and his customers?  In my experience, if this is a small business, 10% of the existing customers are there exclusively because of the owner.  These could be friends and family.  Will these customers stick around after the sale?  Does your projected cash flow anticipate a drop in customers who may be lost due to the personal relationship with the old owner. 

 

For example, people do not like to change their hair dresser or barber, if they found a good one.  If the customer moves from the area, they may still travel to the old barber/hair dresser even though it is no longer close by or convenient.  If the barber/hairdresser sells the business, you will have to get a new person trained to do what you want.  Will you be willing to drive out of the way to an inconvenient location or will you try a new person who is close by and more convenient to you.  Since you must change, are you going to make it more convenient for you?  This is relevant with other businesess as well.


Filed under: Buy a business — Gary Landa @ 10:05 am


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