Buying a Business

2. Preliminary Due Diligence

You must be sure that the business has no major problems. Preliminary 'due diligence' is completed before you make a firm offer for the business. The vendor's Sales Memorandum usually glosses over the weak areas.

2.1 Get a feel for the business.

• Research its market and its main competitors.
• Meet the vendor. Try to visit the business.
• Assess the key risks associated with the business' future trading.

2.2 Ask industry experts for their views.

• What is the prospective demand for the business' products or services?
• Are prices (and margins) rising or falling?
• How is the competition in that market changing? For example, which new competitors are entering it?