In our latest discussion of the business sale process, we outlined the submission of the letter of intent by the buyer to the seller of the business. With the submission and acceptance of the letter of intent the period of due diligence begins. The length of the due diligence period is outlined in the letter of intent and can vary from business to business, but generally for a small business only a week or two is necessary.
During due diligence the buyer has the opportunity to validate all the information the seller provided, learn more in depth about the business, and ask questions of the seller. Documents the buyer may review or request are profit and loss statements, balance sheets, taxes, credit card statements, lease agreements, employee handbooks, vendor contracts and, really, any other document pertaining to the business.
Due diligence is the main opportunity for the buyer to confirm they would like to move forward with the business purchase, so it is important they do due diligence justice and leave no concern unaddressed. Interactions with customers or employees are really the only off-limits item during due diligence. The buyer can, of course, discuss employees and customers ad nauseum with the seller, however, at this time.
At the end of due diligence, if no unforeseen issues arise, than the buyer will move forward with the business purchase and the LOI will be translated into a purchase agreement. If for any reason the buyer is not content with purchasing the business following the due diligence period, they can still decline the LOI.
The due diligence period can be an intense piece of the business sale process, but your business broker will be facilitating the process the entire time. If you would like to learn more about the business sale process and what it could look like for you, we invite you to schedule a complimentary consultation with one of our experienced brokers today.
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Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her working experience has largely focused on business development and marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree in Global Interactions from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high life!
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