Posted on Wed, Dec 02, 2009
Whether you are selling or buying a business, allowing a business broker to assist you with the due diligence process is a good idea. Most business brokers would use a simple definition of “due diligence” to mean the process through which a potential buyer evaluates a target company or business for the purpose of acquisition.
According to the U.S. Securities Act of 1933, business brokers must conduct a due diligence investigation for the businesses they are selling and disclose their discoveries in order to not be held liable for non-disclosure.
In Arizona, business brokers are governed by the Arizona Department of Real Estate, which requires them to disclose material information that could affect a buyer’s interpretation of the sale price as well.
The due diligence process is similar to a forensic analysis. According to many business brokers, relevant areas of concern can include financial reports, the business’s place in the market, real and personal property, insurance and liability coverage, review of debt, employee benefits, immigration, and international transactions.
Business brokers say that due diligence should be performed before a company goes to market. This helps to uncover any hidden or unexpected costs that may be associated with the sale of the business, ensuring that the seller is receiving a fair sum from the buyer. The best advice is to employ the help of a qualified business broker.
Protecting the seller is a business broker’s job, and properly performing due diligence is one of the most important steps to take when selling your company. Broker’s may also be retained to protect the interests of buyers.
Portions of this post originally appeared on Web site of the International Business Brokers Association, Inc.
http://www.ibba.org”>http://www.ibba.org
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Fri, Oct 02, 2009
If you are like most small business owners who have ever thought about selling your business in Tucson or Southern Arizona, you have probably asked yourself on many occasions “I wonder how much my business is worth.”
A small business is typically the owner’s principal asset, aside from a home. And yet, surprisingly few business owners in Tucson or Southern Arizona thinking of selling a business put themselves in the shoes of a potential buyer when asking that question.
The value of your business will be determined by the market. In other words, the asking price is what the seller wants, and the sale price is what the seller gets from a buyer. The amount that a buyer may be willing to pay for your business is a direct consequence of the money they believe your business will put in their pocket. Buyer’s have a number in mind, a desired rate of return. And they have many investment options available to them when making a Tucson or Southern Arizona business investment. How will you demonstrate to them the potential cash flow that your business offers a buyer in exchange for their investment?
The answer: by showing the buyer accurate and verified financial and accounting records.
Don’t wait until you think you want or need to sell your business in Tucson or Southern Arizona to begin organizing and standardizing your accounting records. There is nothing that will discourage a buyer wanting to make a Tucson or Southern Arizona business investment more from further evaluating the purchase of your business than incomplete, inaccurate, or unprofessional accounting practices and records. If you put yourself in the buyer’s shoes, you would expect the same.
Seek the advice of a professional CPA in order to review and standardize your accounting practices, and, if you have not already, invest in a small business accounting software such as Quickbooks that most buyers will be familiar with. Make sure that any personal expenses that were charged to the business are clearly disclosed or annotated as such, to make the process of explaining to a prospective buyer the true Discretionary Income generated by your business clear and direct. Keep a file containing those receipts for future cross-reference and spot check by a potential buyer during due diligence. If a buyer wanting to make a Tucson or Southern Arizona Business Investment can quickly understand the financials of your business and find them trustworthy, they are much more likely to move to the next stage of evaluation.
Don’t wait until you need or want to sell a business in Tucson or Southern Arizona to invest the time in developing accurate, standardized and systematized accounting records. Having them will allow you better visibility into your business, and lead to better decision making that will increase it’s value. It will also allow you to immediately show a buyer that your business is worthy of their consideration.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com