There’s a lot of research that goes into starting a small business. Before you can open your doors and accept your first client, it makes sense to learn everything you can about the industry, local market and your competitors. If you’ve done this right, then you’ve done your due diligence.
Unfortunately, many small business owners stop there. Continually applying a due diligence process to your business can help you stay one step ahead of the competition.
Let’s look at how due diligence can help you achieve three small business goals.
Goal 1: Buying an established small business
Due diligence can help protect you when you’re buying a small business that’s already up and running. The process can identify the risks their operation faces, so you have a better idea of what to expect before you buy. Importantly, your due diligence can also give you a leg up while negotiating the purchase price!
If you are doing due diligence on a business you’re thinking about buying, be ready to sign a Non-Disclosure Agreement.
Goal 2: Starting a business from scratch
Due diligence helps keep you focused. When you’re starting a new small business, there are many moving parts that you need to be on top of to succeed. Your due diligence process can help ensure that nothing gets overlooked and steps are taken to prevent mistakes.
An effective due diligence process can help the start up phase go smoothly. It can also help prevent costly mistakes, such as improperly filing paperwork or neglecting to consider business insurance.
Goal 3: Selling your business to retire in style
Due diligence can help keep your business healthy and ready to sell. You don’t need to say goodbye to it just yet, but you can make the job of future investors as easy as possible. After all, if you wouldn’t buy your small business as is, why would they?
Use your due diligence to continually assess your business for new risks. For example, maybe day-to-day operations rely too much on you doing the heavy lifting. It might be time to delegate some of the work and responsibility, so things don’t fall apart every time you step away for a holiday or long weekend.
What does due diligence look like?
The process for due diligence looks different depending on your business goals. There may be many different things to look for at each stage of your small business journey, such as:
- Understanding the sale of business contract
- Obtaining the appropriate Government license to operate
- Meeting any business insurance requirements
- Ensuring staff are properly paid and there are no HR liabilities
- Understanding how the business functions, including key employees and their role
Need legal help?
If you’re buying or starting a small business, you may want to consider getting legal advice to help you through the process. Our partners at Lawpath can help you access legal advice for an affordable price through their Legal Advice Plan.
Contact a Lawpath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
