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  • Writer's pictureDave Fuller

Why Due Diligence is Your Friend when Buying a Business

Updated: Jun 30, 2023


Philip was stressed because he was going to lose another deal. A few months ago, he had wanted to put in an offer to purchase a business but had been slow in getting in his Letter of Intent (offer) and had been beat out by someone who was quicker to the trigger. Phil had been looking at another business for 6 weeks now and an offer had just been submitted by a competitor.


Philip is typical of many prospective business buyers who try to do much of their due diligence in advance of an offer. Due Diligence is a clause that is specifically designed to enable the buyer to ensure that what the seller is saying about his business or property is correct. This enables you to get into the weeds of the business and do a sophisticated analysis of every aspect of the business that you might have concerns with, these include but are not limited to:

  • Company Structure

  • Asset Lists

  • Financials

  • Lawsuits and legal status

  • Condition of equipment

  • Inventory status and quality

  • Leases

  • Accounts receivable

  • Customer lists verification

  • Marketing

  • Industry

  • Supplier agreements and standing orders

  • Insurance and requirements

  • Licenses and permits

  • Good will - how good is it?

  • Environmental

  • Employees - Who is staying and who isn’t?

  • Employee agreements and commitments

  • Tax standings

  • Contracts and agreements

  • Non-compete agreements


The idea of a letter of intent is to provide the prospective buyer the opportunity to put forward an offer and then through due diligence ensure that the value is equal or greater than the amount offered. It is of key importance that the due diligence process be structured and each piece of information that is required be systematically and diligently verified. While no risk can be ultimately eliminated, the due diligence process gives you time to reduce risk and ensure the ongoing viability of the company for the future benefit of the new ownership. If you would like a copy of a due diligence checklist, please send me an email to dave@businessrealtor.ca.


Philip eventually realized that getting to the offer or Letter of Intent was just the first step in a process of deliberation of value. This allowed Phil to reduce his stress and get to the point where he was able to put in an offer for a business. The due diligence went smoothly and in the end, Phil was able to go through with the deal that enabled him to achieve his financial goals and create the lifestyle that he was looking for.


Dave Fuller MBA, is a Licensed Realtor specializing in Commercial and Business real estate transactions in Northern British Columbia. Email your questions to dave@businessrealtor.ca

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