Question: What is due diligence?Answer:
Due diligence is the process you should go through prior to purchasing a business by assessing all relevant factors affecting the business and its future success, and assessing the risks.
Usually, the process of due diligence will be conducted after you and the seller have agreed to a deal, but before you have actually signed the sale of business contract. At this time the seller may ask you to sign a confidentiality agreement before giving you sensitive information regarding their business.
In doing your due diligence you will likely assess aspects of the business such as;
- Its operations;
- Business model;
- Legal structure;
- Financial success (or lack thereof);
- Their clients and customers;
- Intellectual property and;
- Existing assets.