Why Due Diligence Matters
Buying a business is one of the largest financial decisions you'll ever make. Before you sign anything, thorough due diligence can mean the difference between a great investment and an expensive mistake.
What to Check
- Financial records — Request the last 3 years of profit & loss statements, tax returns, and BAS statements.
- Lease agreements — Understand the remaining term, options to renew, and any personal guarantees.
- Staff arrangements — Check employment contracts, entitlements (leave, super), and any pending disputes.
- Customer concentration — If one customer makes up >30% of revenue, that's a risk worth pricing.
- Supplier relationships — Are contracts transferable? Are there exclusivity clauses?
The Numbers Don't Lie
| Metric | What It Tells You |
|---|---|
| EBITDA | Operating profitability before non-cash items |
| Net Profit | What the owner actually takes home |
| ROI Payback | Years to recoup your purchase price |
| Profit Margin | Efficiency of the business model |
Tip: Always engage an accountant and a business solicitor before settling. The cost is minimal compared to the risk.
Final Thoughts
Due diligence isn't just about checking numbers — it's about understanding the business, its people, and its place in the market. Take your time, ask hard questions, and don't let emotion override rational analysis.