Due Diligence - Compliance Assessment

When it comes to buying a business Due Diligence is the process of thoroughly informing yourself about the business and substantiating information provided by the vendor.

Usually you will need to spend between 5% and 9% of the sale price on doing due diligence.  For example if the sale price is $100,000 you will need to budget between $5,000 and $9,000 for due diligence.

Part of your due diligence budget should be spent on obtaining a Compliance Assessment of the business.

The objectives of a Compliance Assessment are to ensure that:

• reported profits are based on legitimate trading practices; and
  
• you are buying a business with solid foundations.

Your Accountant will advise you on whether the business is financially proftable.

But profits can be easily inflated through non-compliance with a range of business regulations.

During the Global Financial Crisis businesses may have been tempted to breach regulatory compliance obligations to stay afloat, or boost profits to increase the sale value.  Buying a business where this has occurred means that you will potentially:

When purchasing a business you should have a team of at least three people:

Solicitor - have the contract sent to your solicitor before signing.  Ask your Solicitor to include a clause that a Compliance Assessment be undertaken on the business.  Your Solicitor will also be able to arrange for the transfer of any licences and intellectual property owned by the business.

Accountant - to advise on whether the business is proftable and right for your financial situation.

Blue Mercury Consulting - to conduct the Compliance Assessment.

The Compliance Assessment will enable your Solicitor and Accountant to properly advise you about the business you are looking to purchase.

Compliance Assessments are tailored to the compliance obligations of the business and start at $550 (inc GST).

Contact us today to book your Compliance Assessment.