SLC Business Buyer Due Diligence Checklist

When it comes to business sales, there isn’t a whole lot of secrecy involved between parties. Due diligence and disclosures are a vital part of this process, with both prospective buyers and sellers sharing several areas of information – including a basic understanding of what the opposing party is looking for, which will help make better decisions toward your goals.

At Utah Business Consultants, we’re here to help on both sides of this coin. We’ve assisted numerous individuals and entities with both buying and selling a business in Salt Lake City, and a key part of this process involves understanding the general desires of buyers and the key areas they’ll look in. Whether you’re a prospective buyer considering businesses or a seller looking to get in-tune with what your potential buyers will be looking for, here’s a broad checklist of some of the most important areas for business buyers as they scour the market.

Margins and Financial Health

First and foremost, buyers will naturally be interested in the pertinent financial details of any business they’re considering acquiring. Understanding the ins and outs that determine whether the business is profitable, or even whether it can be in the future with the right tweaks, is vital.

Some of the areas that may come up here include:

• Information on the gross margins of the business over the last several years
• Data on business lines of credit and creditors owed
• Information on trade discounts, bills and other cash management themes that may impact future operations
• Evaluation of monthly and annual financial statements and the preparation processes for these important documents in-house

Management and Ownership

Another important factor for a business buyer will be evaluating the management and ownership structure of the current business. Has management been consistent across recent years, for instance, or has there been significant turnover? Will the seller of the business continue in any kind of ownership or management capacity? These and several related questions will all come up.

Marketing Themes

Marketing is also very important for many businesses. Is the company producing new products or services, or planning to in the near future? What about the business market share and how it compares to the competition in the industry? Plan for significant conversation to arise in this area.

Inventory and Manufacturing

Finally, if the business is one that manufactures products, what is the current inventory level? Is inventory turnover higher than the buyer might like, or is the company working with too large a range of suppliers? These and other questions related to inventory and the products created will often be paramount to a sale going through.

For more on the kinds of items buyers are generally looking at for a business sale, or to learn about any of our business brokerage services in Salt Lake City, speak to the staff at Utah Business Consultants today.