Buying A Business: Due Diligence is Key!
Dr. James had been dreaming of owning his own dental practice ever since he graduated from dental school. He finally had enough money to buy an existing practice with 2 partners.
The practice was located in a desirable part of town, and the seller was willing to accept the offer. Everything seemed to be going smoothly until the due diligence process began. I created a due diligence request, which is basically a list of documents that the seller has to provide for the buyer’s review. This process is critical so that the buyer knows what the gaps are and can be confident that he still wants to buy the business.
James and his partners quickly discovered that the seller had not been completely honest about the condition of the practice. There were several issues with the equipment, the building, and the financial records that needed to be addressed before they could move forward with the purchase.
This information was used to shift risk back and forth during the contract negotiations. It took some time to negotiate a lower price and resolve the issues, but James will be thrilled to have his own dental practice.
James was relieved that he had taken the time to properly investigate the practice before finalizing the purchase contract.
Lesson learned: never take anything for granted when making a major purchase.