Business Acquisition Checklist

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Business Acquisition Checklist

Before buying a business, review our small business acquisition guide

Here is a comprehensive guide to the reasonable steps taken during the process of buying a business.

Business Acquisition Due Diligence Checklist

Financial Information

  • Tax income and sales tax returns (federal, state, local, foreign): last 3-5 years
  • Interim income statement: year-to-date and comparison to previous year
  • Interim balance sheet: year-to-date and comparison to previous year
  • Accounts receivable
  • Accounts payable
  • Business valuation

Physical Assets

  • Inventory – value, age, condition, etc. Is the inventory sellable or leftover from what the current owner wasn’t able to sell?
  • List of furniture, fixtures, and equipment
  • Machinery and equipment lease and purchase agreements
  • Vehicle registrations and titles
  • U.C.C. Filings

Real Estate

  • Lease agreement: How long is the lease? Are there restrictions that might prevent you from expanding products or services? Does the tenant or the landlord maintain the premises?
  • Environmental studies
  • Previous appraisals
  • Location and market research
  • Security systems in place and past burglary reports

Product and Service Information

  • A list of all products or services currently offered
  • A list of all products or services under development with summary of relevant data
  • Sales records – can be helpful to evaluate the sales breakdown by product, service, client, and method of payment
  • For motels and hotels: occupancy rate, average daily room rate (ADR), revenue per available room. (RevPAR), STR or STaR report. Read our article on how to buy a motel or small hotel here
  • Summary of all complaints, warranty claims, and returns
  • Product or service market research reports
  • Business reputation research: review search engine results, Yelp, Facebook, Better Business Bureau, etc.

A pre-qualification is a great way to get a headstart on your application and will help in your negotiations. There is no credit check required and you’ll receive your pre-qualification letter and borrowing estimate within 24 hours.

Markets and Competitors
  • Customer profile
  • Existing supply or service agreements
  • Company’s credit and purchasing policies
  • Schedule of unfilled orders
  • Market research reports
  • Previous and current advertising and marketing efforts
  • List of competitors
Employee Information
  • List of employees with name, position, start date, salary, contracts, and benefits
  • Copies of all stock option and stock purchase plans
  • Worker’s compensation claims history
  • Unemployment insurance claims history
  • Franchise Agreement
  • Franchise Disclosure Document
  • Distribution agreements
  • Supplier agreements
  • Sales contracts
  • Vendor contracts
  • Employee agreements
  • Subcontractor agreements
  • Nondisclosure or noncompete agreements
  • Security agreements, mortgages, and collateral pledges
  • Any other legally binding agreements
Regulatory Compliance
  • Details of litigation threatened, pending, or taken
  • Inspection reports such as building and health inspections
  • Licenses and permits – liquor license, lottery license, etc.
  • Insurance – What is the insurance coverage? What claims have been made in the past?
Organization and Good Standing
  • Articles of Incorporation and Bylaws
  • Organizational chart
  • List of shareholders and number of shares held by each
  • A Certificate of Good Standing
  • A list of all states where the Company is authorized to do business and annual reports
  • Fictitious Business Name Statement

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