When buying a business, it is paramount to know the history of the business prior to purchase.
Incredibly, about 70% of the business owners we see as clients ask for due diligence reports and background investigations only after they have purchased the business.
The simple truth is this: Background checks are absolutely vital for all parties involved in any business acquisition. The price for a background check is minimal compared to the potential costs of not getting one.
So if you’re looking to purchase a business, here are some tips to guide you through the homework process:
1. Have a reputable private investigative company perform a Business Due Diligence Report on the company.
At a minimum, the report should include a complete company profile, parent companies and subsidiaries, officers and directors, current and former employees, corporate assets, property information including foreclosures and evictions and UCC filing, liens, judgments and bankruptcies.
The report will also include a risk assessment and score, trades and collections and risk indicators.
2. Hire the right attorney.
Hire a street-smart business attorney who is knowledgeable in mergers and acquisitions. Call our toll-free number (below) for referrals.
3. Hire a forensic accountant.
You are looking for a forensic accountant who specializes in business purchases. Aim for someone sharp who can uncover irregularities.
4. Categorize and inventory all physical assets.
Vehicles, aircraft, etc
5. Have your private investigator perform an unannounced visit.
Your private investigator can stop by the company to determine the nature and scope of the work being done.
6. Review all files and key personnel.
This includes personnel files, subcontractors, 1099’s, board members and advisory members.
7. Review all contracts with contractors and suppliers.
With specificity as to the time-frame of the contracts.
8. Do a complete litigation search.
You need to know about civil cases that are both current and pending finalization. Do not overlook asking about threatened litigation.
9. Review all injury claims.
Carefully examine all insurance claims and worker’s compensation cases.
10. Have your private investigator interview the companies’ key employees and largest customer accounts.
There are often problems at a business that are completely unknown to management.
Please consider using a private investigative firm in your area to assist you with the business purchase BEFORE you spend your hard earned money.
At Martin Investigative Services, we perform reports in all fifty states at the rate of $300.00/hour. We are often contracted to conduct interviews throughout the United States and abroad by corporate executives.
If you have any questions or wish any matter clarified about our investigative tools to assist you in buying a business, please email us or call our toll-free number below. Ours takes about two days to complete and costs $495.00