BUYING
A BUSINESS- THE DUE DILIGENCE PROCESS
Once you have found a
suitable business that interests you, the next step is to
investigate it thoroughly.
The due diligence process involves finding out if the business
is viable and likely to live up to your expectations. It’s
likely to involve some in-depth financial and market
analysis. This is the step before you negotiate an offer
price with the owner.
Due-diligence is the process of investigation by a purchaser together
with their legal and accounting advisors before agreeing to proceed with a
business purchase.
"Doing due-diligence" is just as important when buying a one
person business, as it is when buying a multi-million dollar one. Whether it
is large or small, the same things need to be checked out, but it takes more
time with a larger business.
Good advisers will help you uncover any undisclosed
liabilities in the business. For example, overdue bills, tax
liabilities, redundancy agreements, bad debts or accumulated
staff leave. They will also discuss with you the market
potential for the products and services offered by the
business and whether the business has the potential to grow.
It is best to make full use of your team of advisers for
this process rather than attempt it by yourself. Buying a
business is a major commitment so consider the investment in
expert advice well spent if it saves you from buying a dud.
Why are they Selling?
There is good reason to find out why the business is being sold. One of
the first questions to ask is "Why is it being sold?" Reasons can be
many and varied; retirement, looking for a change of scene, wanting to
concentrate on another business, are just some. However, if it is because the
business has reached its full potential and cannot be further improved, or
there has been a change in the marketplace, or some similar motivation, then
you need to take this into account when considering the price.
The Premises
An important aspect of the due-diligence process is the premises. Where
is the business located? Is it necessary to preserve those premises as an
essential part of the business? If so, then you need to look at the terms of
the lease and ensure you can continue to operate from them. Timing of rent
reviews and other renewals are just two points. With this and other issues
that I have referred to below, your solicitor can help you with suitable
clauses in the agreement to give you time to investigate these.
Apart from the lease, other aspects of the premises need to be
considered. There are many regulations and laws governing the operation of
different businesses. Some of the regulations are administered by Government
Departments, others by Local Authorities. It is important that all of these
are checked out, such as zoning under the Resource Management Act,
occupational safety and health requirements, food and hygiene regulations, or
requisitions for work that needs to be undertaken to bring the premises up to
standard. Staff can make or break a business, and are a very important factor.
Who are they and on what basis are they employed? Do you want to keep them on?
Their employment contracts are important.
Financial
You need to know how much money the business is making and will ask for a set
of accounts.
These can often reveal a lot, but it is important that you not only see
the last set of accounts, but also for previous years as well. These will show
any trend in the business. It is an area where both your accountant and
solicitor can be of assistance to you. The information is very important when
you approach your financier for a loan. Your financier or bank wants to ensure
that you are able to repay the loan and on what basis it can be repaid. The
budgets which will be prepared by your accountant to show this, will be based
on figures revealed by these accounts. They will indicate how the business is
financed and what working capital you are likely to require. Once again your
solicitor and accountant can be of assistance in this area.
The Customers
Who are your customers? Will you lose any of their business on a change
of ownership because of some personal relationship that customers have with
the vendor? Are there some sales that do not come through the door? Similarly,
you need to see who your suppliers are. Is there any special relationship in
respect of those suppliers which will end once the vendor sells the business?
These special relationships for either your customers or suppliers
could fall into any number of categories. They could be companies or
businesses owned by the vendor or vendor's family with whom he is dealing.
Special arrangements with friends or people who only want to deal with the
vendor are another possibility. There could be special discounts which you
need to know about.
Know The Business
The agreement for sale and purchase should also include a clause
requiring the vendor to provide you with assistance for a specified period.
You will need to acquaint yourself with the business and become
familiar with it. The vendor can introduce you to the customers and to the
suppliers.
Points to Investigate
Summary
The matters outlined above are just some of those things that need to
be considered when buying a business, and in carrying out the due-diligence
process on that business. Large companies spend a lot of time in planning the
process that they will go through in checking out a business that they are
going to purchase. They use their solicitors and accountants both in
preparation of the checklists, and in carrying out the checking. The process
is a time consuming one, but very interesting things can be revealed.
When you are looking for a business to purchase, your real estate agent
or business broker will be able to help you in locating businesses of interest
to you. Once you locate the business that you think is right for you, you will
want to prepare your offer for the purchase of the business as soon as
possible. However, by consulting your solicitor for suitable clauses to be
inserted in the agreement, you will be given the opportunity to carry out the
necessary investigations before making the contract unconditional.
Even if problems regarding business are revealed during the
investigations it is likely that you will still want to proceed with the
purchase. However, you will be prepared and will also have the opportunity to
amend your offer.
And that is what due-diligence is.
FENG
SHUI FOR BUSINESS SUCCESS
Feng shui (pronounced fung shway) is the ancient Chinese
art of placing objects that will bring either favorable or unfavorable
effects; the placement of which is based on the flow of energy in the
universe call chi (pronounced chee) and on patterns of yin
and yang.
The literal translation for the Chinese words “feng” and “shui”
are “wind” and “water.” It is through wind and water that chi flows
through nature and the universe. Chi should not be impeded but balanced so
that any negative forms (sha chi or “poisoned arrows”) may be offset
with positive adjustments.
Yin and Yang is both a symbol and belief of natural opposing yet
complementary forces that allows a harmonious universe to exist. Nothing can
be totally yin or yang; there will always be at the least a miniscule amount
of one in the other. Yin, the black side, is characterized as weak, passive,
dark, cold, winter and female; Yang, the white side, is characterized as
strong, active, bright, warm, summer and male. Feng shui is based upon the
yin and yang philosophy.
The Ba-gua
This is one of the most powerful tools in feng shui to create positive
changes. The ba-gua is an octagonal chart that depicts the eight points of a
compass. Each direction on the compass focuses on a different facet of life;
i.e., Southeast influences wealth and fortune and can be characterized by
the color purple and the number four. Using this knowledge can help to
achieve goals in all aspects of life.
BUSINESS APPLICATIONS
Declutter Your Desk and Work Space
According to feng shui, work performance and business wealth can be
increased by decluttering and establishing order on your desk. Productive
chi cannot flow if all that “stuff” on your desk is blocking its
movement and cluttering up your mind.
Take everything off your desk and clean up any cluttered areas around it.
Put back only items that are used everyday, and papers on your desk must be
limited to those for one project only. Other items and papers should be
placed elsewhere; in file cabinets, desk drawers, and storage
cabinets/containers.
Now that your desk is clutter-free, add things that are lovely, positive
and career-enhancing. Use the ba-gua to guide you; for example, to generate
more wealth to your business, place a red or purple artifact on its
southeast corner. The eastern side of your desk is your health, growth and
family area, represented by wood and the color green. A plant would be nice
in this space or a family picture in a wood frame.
Position of Your Desk in a Room or Office
In the practice of feng shui, the happiness, success and prosperity you
have in your business life is greatly influenced by the position of your
desk. The optimal position is one in which your desk is set back to view as
much of the room as possible, with your back to a wall. You should also have
a view of both a window and the door, but never in direct line with the
door. Diagonal desk and door alignment is best. The doorway or window should
never be directly behind your back; to do so would invite negative sha chi.
Flowers and Plants
Live plants and flowers bring many positive elements into the workplace.
Aside from their natural beauty, they improve air quality, unite us with the
natural world outside, and their green color encourages personal and
business growth. Avoid any cactus or plants with sharp-looking leaves as
these may cause sha chi . To bring their positive influences, plants and
flowers must be healthy and flourishing. If a plant dies, remove it and
replace it with another. Keep in mind it better to have a silk plant than
none at all. Just be sure to keep it dusted and vibrant-looking.
Water
Water is the most powerful symbol of money in feng shui. Its sparkling
chi energy is beneficial for your health and prosperity but care must be
taken to keep water fresh and clean.
Fountains are wonderful but be sure their water flow is not blocked,
stagnant or very rapid. Scaled-down fountains that are designed for a desk
or small table are a good choice if space is limited.
Another great choice is either a fish tank or aquarium. Consider
including goldfish in your tank as gold is a Chinese symbol for money and is
thought to attract it.
Another great way to incorporate water into your business is the use of
any artifact that depicts water.
Home Offices
Feng shui promotes the importance of keeping business and personal life
separate when you have a home office. An outside separate entrance to your
office is optimal. If not possible, a room near the front or back door of
the house or apartment is best. When a home office is part of a larger room,
be sure to partition it off with something like a screen or large plant. An
area rug on the floor can also be used to mark off the office.
What type of ceiling do you have in your home office? Flat ceilings
promote the flow of chi and are best; otherwise hang wind chimes from
cathedral or sloped ceilings to offset sha chi.
Enhance your personal chi and your professional appeal by dressing well
and taking care of your overall health, hygiene and appearance. Resist the
urge to work at home while unshowered or adorned in your sweats or pajamas.
Keeping thoughts of work and home from commingling can be difficult at
times when you work at home. Consider taking a short walk each day before
and after your “work” day as another means of separating your business
life from your personal life.
