What Exactly is “Due Diligence” Anyway?

Anyone who has ever bought or sold a business, or has even thought about it, has heard the term “due diligence.” Most entrepreneurs and the general population alike – don’t know what it is or, if they do, severely underestimate what it means.

Due diligence is the business world’s equivalent to the home inspection. Some of the questions you will ask are actually quite similar to those you would ask in a home sale:

  • Is the foundation strong?
  • Will the roof need to be replaced in a year?
  • Does the vendor have clear title?

For a is just more complexe, the checklist below give an overview about general question to ask, but it should not be considered complete – always consult a professional (lawyer, accountant, business consultant) to ensure you have covered all the bases.

  • Corporate structure
  • Financial statements
  • Government obligations
  • Operational issues
  • Real property review
  • Transition negociation
  • Material contracts
  • Retirements / transitions issues
  • Litigation
  • Environmental issues
  • Intellectual property (patents, trademarks, other)
  • Licensing

The list may seem extensive but due diligence is all about ensuring that you are protected from any surprises after a purchase is complete.

To learn more about due diligence when you’re buying a business, contact our experts today at (438) 765 5838 or send us an email through our contact form.