If the buyer in front of you is your best option, you cannot risk the transaction because of a lack of preparation. By turning in inadequate, inscrutable, or incorrect records for due diligence requests, you could scare a buyer away—one who might perhaps be your best, or only, buyer.
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October 2022Wrapping Your Mind Around Due Diligence
With an almost endless number of documents a buyer could request during due diligence, it’s difficult to know where to start to prepare your business for an eventual transaction. If you don’t have a due diligence request list in front of you, look to other parties that are also evaluating you. For example, if you’ve been accredited, inspected, audited, or surveyed by any third party, use their evaluation process as an opportunity to stress-test your business to see where any gaps might be.
How your business works may make perfect sense to you, but in a transaction, it needs to make sense to someone else. Take notes during these third-party interactions. How easy was it for you to assemble the information they asked for? Did you find yourself having to find creative ways to present the information in the way they requested, or was it a straightforward procedure? Did the third party need to ask a lot of additional questions to get the information they needed? At the end of the evaluation, you may receive an updated license or certificate from them, but you will also have received your marching orders for improvements you can make to ensure any future transactions go smoothly.
When all is said and done with the third-party evaluation, sit down with any other stakeholders in your business to discuss how to make the next evaluation (or the sale of the business) better. If your filing system was disorganized, create a system that allows you to find the necessary files quickly. If certain information was missing entirely, make a plan to find that information and memorialize any changes you make to your processes.
Running a Business Like It’s Always for Sale
But maybe you aren’t ready to sell your practice. Maybe your plan is to sell it in a couple of years, or perhaps not until you retire years from now. You may think that your business is doing just fine. Everyone gets their work done, the money comes in, and the bills get paid. Why worry about making all these disruptive changes for a hypothetical sale sometime in the future?