This post is about one of my 45-second pitches at my BNI Chapter, BNI City Business. You can read the introduction to this collection here.

28 July 2023. The second slide in my Another Lens series. This must be one of the most important apostrophes in business, and highlights the need to ensure you have an attention to detail. Reasonably well received by the room, seemed to be little trouble understanding the message.

A reasonable attention to detail is also important when buying a business. Focusing on the detail – as well as the big picture, of course – helps ensure you make a suitably informed decision. As they say, the devil is in the detail. For most people, buying a business is a significant financial undertaking. Between making an offer and closing the deal, you get the opportunity to undertake a deep dive into the business – the process referred to as due diligence. Due diligence is an exercise in drilling into the detail of the business, understanding the business, in order to feel comfortable buying the business for the agreed price.

Overlooking – or not even asking about – important details is likely to lead to serious consequences for you as the new owner of the business.

Being Forewarned

The due diligence will typically turn up a range of issues. Some of these issues will be fixable by the vendor, or may result in a price renegotiation. Most, however, are factors you have to make work.

A focus on the detail will help you identify risks to the business, and the kinds of challenges you are likely to face as the new owner. These risks and challenges may come from inside the firm, or from the outside. A good starting point can be a thorough SWOT analysis – an identification of the business’s Strengths and Weaknesses, and the Opportunities and Threats in the market.

While a good due diligence is likely to give you some level of leverage over the vendor, it does not mean they will agree to everything you uncover. There is no harm in asking, as long as you don’t get upset if the answer is no. You can’t eliminate every risk, you can’t even identify them all.

The Unknown Unknowns

Even with the most exhaustive due diligence review, there are still likely to be some surprises once you are the owner. It is not possible for you to uncover everything. It is not that the vendor has withheld information or lied. There are just things that are unknown. Unknown to the vendor, and unknown to you.

Being in business is about managing risk. Managing risk does not mean eliminating risk. It means understanding the factors that give rise to the key risks in your business to enable you to understand the costs and benefits of mitigation. Insurance, for instance, is a way to mitigate business risk by outsourcing that risk to your insurer.

There will inevitably be risks you can’t avoid or outsource cost effectively. Trying to do due diligence yourself is a great way to get burned. Get the right advice!