In this article we will discuss the importance of research when purchasing a business
Preparation is absolute key and research is imperative when it comes to preparation. The importance of research should not be underestimated and so our first piece of advice is to research, research and then research some more.
You should properly and thoroughly research your prospective business in order to determine the strengths and weaknesses of the business in question. This will allow you a very clear idea of the business you are purporting to purchase. You should delve deeper and to get a true picture of the business it would be worthwhile you requesting the following:
– Financial statements
– Information of customers and relevant suppliers
– Information relating to employees, in particular figures regarding their salaries and their length of service
– A comprehensive list of al assets of the business including equipment.
– Information relating to any debts, licenses and liabilities that the company may have.
You should note that before a company is willing to share this type of sensitive information, they may require you to agree to and sign a non-disclosure agreement. This type of agreement is very common and in effect it prevents you from using the information provided to you for any other purpose save for buying the business. Before signing such an agreement you should obtain independent legal advice. Lawdit are happy to assist with such queries.
Once you have signed the non-disclosure agreement and have been supplied with the information you are seeking, it is important to review the information correctly. In order to do this we would advise you to review the information in conjunction with other available resources, such a government databases, this will allow you to verify the information and check that it is indeed correct. Such searches will be useful in showing whether there are any liens on the business assets whether there are unpaid taxes whether there is any ongoing legal action and also whether the buildings and motor vehicles that you have been advised of are in fact owned by the seller.