Due Diligence for business

Discussion in 'Starting & Running a Business' started by Triu, 18th Apr, 2007.

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  1. Triu

    Triu Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    149
    Location:
    WA
    Hi can anyone tell what i should be looking for when buying a existing business?

    Also I have a family what structure should i use to protect my property and my IP.

    Should i use a Discretionary Trading Trust?

    Any comments would be appreciated.

    thanks
     
  2. Nigel Ward

    Nigel Ward Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    989
    Hi Triu

    Depends on the nature of the business...I'm looking at a 300 page legal due diligence report on a deal at the moment (and that's not counting the separate accounting and tax report, insurance report and market report)!:eek: :rolleyes:

    In essence though, the purpose of due diligence is to figure out that you're getting what you pay for and that you're not paying too much for it.

    Perhaps if you can give us some further details as to the nature of the business we can be more specific?

    Cheers
    N.
     
  3. Triu

    Triu Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    149
    Location:
    WA
    Hi Nigel thanks for the quick reply.

    The business is a pizza business which has been operating for 3 years and is in a good location. It is about to be franchised but i have been offered to buy it before it gets franchised. There is two businesses operating with the same name but in different suburbs.

    I have the support of the business owner who will train me etc and and support in marketing of the business.

    Open 7 days a week and is a gourmet type pizza business.

    that's all i know until i get financials sorted out!
     
  4. MattR

    MattR Well-Known Member

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    1st Jul, 2015
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    214
    Location:
    Sydney
    Be careful if they give you the "blue sky" financials ie this is the cash position of the business! - they are almost worthless.

    Use the financials and their corresponding tax returns to correlate the financial data to estimate what they are making and what the business is really worth.

    Otherwise, what type of structure you use will largely depend on you and your situation. Perhaps the business could be bought by a Family Trust and then a licence granted by the trust for another entity/structure to operate the business.

    Best of luck, make sure you get the appropriate legal, accounting and franchising advise
     
  5. quoll

    quoll Member

    Joined:
    4th Aug, 2015
    Posts:
    24
    Location:
    Mid Coast - South Australia
    G'day

    Ask for access to their computer, check all the figures, get bank account statements check that deposits match figures on computer.

    Get a solicitor involved, they will draw up a contract that benefits you instead of the contract the selling agent will draw up.

    So bank account statements, access to the computer to check figures. Check paper work as that is harder to doctor up than the computer. This due diligence should take you a few days.

    If the owner doesn't want to give you free and easy access to the information just walk away. Another good deal with be around the corner.

    Cheers
    quoll
     

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