Investigate Business Listings – Do Your Due Diligence

Mar 20, 2012

Unfortunately, buying a business isn’t as simple as perusing the business listings and finding the one you like best.  It is a long and arduous process that requires a thorough investigation of financials, including an inspection of the premises, interviews with employees and an assessment of business assets.  Any experienced entrepreneur will tell you how important it is to do your due diligence when acquiring an existing business.

If you aren’t working with a business broker, then the process of vetting an existing business may become a long process.  Brokers offer valuable experience with business valuation and industry expertise, which could help you establish whether a business is a worthwhile investment.

What are some ways you can learn about a business on your own?

If the business has earned accreditation from the Better Business Bureau (BBB), it has already met the standards set by the industry watchdog. According to the BBB, this includes “a commitment to make a good faith effort to resolve any consumer complaints.”  Accredited businesses also pay a fee to be reviewed and monitored, which also supports the services provided by the BBB.   Of course, BBB accreditation is not an endorsement by the BBB, nor does it guarantee the quality or competency of the product or service.

Gathering information about an existing business for sale may be simple if the business listings include contact information.  Many of the opportunities listed in a business directory will point to a website or pdf document for more information.  Others will direct you to a broker.  Keep in mind that your information gathering will include more than just financial information.  While a financial review is very important, the success of a business extends far beyond the numbers.

The importance of information gathering in evaluating business listings

Due diligence will identify the strengths, weaknesses, growth opportunities, potential problems and other possible triggers that may prevent you from completing the transaction.  You may also learn how the owner feels about seller-assisted financing and why the business is for sale.   If you miss out on important details at this stage, you may find it impossible to succeed as the new owner.

According to industry statistics, nine out of ten people who start scanning the business listings in search of a new venture never complete it.  The lack of reliable information about the business is one reason for this dismal figure, and it is also explains a would-be business owner’s reluctance to pull the trigger.  If you haven’t yet gathered enough information from a directory of business listings, you will not be 100 percent certain about the next steps.  If you don’t have the time to do the research yourself, hire a business broker to do it for you.