Whether you are starting a new business, adding new businesses, or just trying to expand your current business the most critical part and the first step in this process is proper due diligence. Have you adequately assessed the market in which you will be participating? Are there hidden costs or possible problematic situations to consider? One of biggest mistakes frequently made in purchasing a business is simply paying too much. It takes more than just a simple budget and some hopeful sales projections to justify the purchase price for a business. What is required are sophisticated modeling tools that allow a business owner to plan for several scenarios with multiple factors to consider. These processes should be flexible with the ability to evaluate and change data quickly and correctly. An acquisition can take many months and it takes an experienced hand to properly organize all of the information needed to make a purchasing decision. This same reasoning also applies to start-up and expanding businesses. The raising of capital requires as much due diligence as an acquisition. Too many businesses find themselves over leveraged because of poor due diligence when acquiring financing.

With almost 30 years of working with entrepreneurial ventures I have the experience of preparing or evaluating due diligence whether it was for raising capital through private equity and debt financing, or acquiring new businesses. I have personally evaluated over a hundred potential business acquisitions and have participated in over a dozen financing efforts. My experience in this area is not only limited to acquisitions. Due diligence was also required to properly price several businesses that were sold under my financial stewardship.

Effective due diligence is key to any successful acquisition, sale or financing of a business.