What is due diligence for sellers?

While carrying out your own due diligence as a seller is by no means obligatory, it has quite a lot going for it – remember that buyers will carry out their own due diligence checks on your business before they’re prepared to make a formal offer, and so any problems with your business will generally get turned up at some point. So it’s really a question of when you want to find any problems (if they exist), and when you want to deal with them – from that point of view, carrying out due diligence as a seller is very appealing, and most advisors and buyers will expect it. Here’s what you’ll have to do for your due diligence checks on your business.

Use Advisors

Most small businesses use specialist advisors for the sales process anyway – they have the insider knowledge and experience of negotiations to make selling a business much smoother and more professional, and buyers will much prefer dealing with an advisor. But due diligence is yet another crucial area where it’s essential to have an advisor – as a small business, it’s worth going for advisors from a boutique or accountancy firm, since they work best for smaller companies.

What Does Due Diligence Involve?

Your due diligence is a thorough review of your trading performance – that means it encompasses information on your balance sheet and cash flow, and some analysis of that information. It’s important that you get your due diligence right first time around – sorting out problems now means that potential buyers won’t uncover them later.

So while not legally obligatory, a due diligence check is almost essential for any sales process. It will turn up any problems, give potential buyers confidence in your business, and is a widely accepted standard for starting any sales process – so be sure you carry out your due diligence promptly and well, with the help of your advisors, and you’ll be sure to have a much easier time of selling your business than otherwise.

If you’re selling, remember to use Pomanda’s Business Valuation Calculator early on to get an essential insight into your company’s value.

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